Contributing or free-riding? Voluntary participation in a public good economy
AbstractWe consider a (pure) public goods provision problem with voluntary participation in a quasi-linear economy. We propose a new hybrid solution concept, the free-riding-proof core (FRP-Core), which endogenously determines a contribution group, public goods provision level, and how to share the provision costs. The FRP-Core is always nonempty in public goods economies but does not usually achieve global efficiency. The FRP-Core has support from both cooperative and noncooperative games. In particular, it is equivalent to the set of perfectly coalition-proof Nash equilibria (Bernheim, Peleg, and Whinston, 1987) of a dynamic game with players' participation decisions followed by a common agency game of public goods provision. We illustrate various properties of the FRP-Core with an example. We also show that the equilibrium level of public goods shrinks to zero as the economy is replicated.
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Bibliographic InfoArticle provided by Econometric Society in its journal Theoretical Economics.
Volume (Year): 6 (2011)
Issue (Month): 2 (May)
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Web page: http://econtheory.org
Endogenous coalition formation; externalities; public good; perfectly coalition-proof Nash equilibrium; free riders; free-riding-proof core; lobbying; common agency game;
Other versions of this item:
- FURUSAWA Taiji & KONISHI Hideo, 2011. "Contributing or Free-Riding? Voluntary Participation in a Public Good Economy," Discussion papers 11028, Research Institute of Economy, Trade and Industry (RIETI).
- Taiji Furusawa & Hideo Konishi, 2008. "Contributing or Free-Riding? Voluntary Participation in a Public Good Economy," Boston College Working Papers in Economics 681, Boston College Department of Economics, revised 04 Aug 2010.
- Taiji Furusawa & Hideo Konishi, 2010. "Contributing or Free-Riding? Voluntary Participation in a Public Good Economy," Global COE Hi-Stat Discussion Paper Series gd09-128, Institute of Economic Research, Hitotsubashi University.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
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