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Learning, public good provision, and the information trap

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  • Berentsen, Aleksander
  • Bruegger, Esther
  • Loertscher, Simon

Abstract

We consider an economy with uncertainty about the true production function for a public good. By using Bayes rule the economy can learn from experience. We show that it may learn the truth, but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap. We also show that our results are robust with respect to small experimentation.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4R40SJF-1/1/40f96019ba977fd9f39cfe4cf85099b8
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 5-6 (June)
Pages: 998-1010

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:5-6:p:998-1010

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Paul Heidhues & Johan Lagerlöf, 2000. "Hiding Information in Electoral Competition," CIG Working Papers FS IV 00-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Feb 2002.
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Cited by:
  1. Warren, Patrick L. & Wilkening, Tom S., 2012. "Regulatory fog: The role of information in regulatory persistence," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 840-856.

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