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Optimal Altruism in Public Good Provision

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  • Robert Hahn
  • Robert Ritz
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    Abstract

    We present a model of altruistically-minded-yet rational-players contributing to a public good. A key feature is the tension between altruism and "crowding-out" effects (players' efforts are strategic substitutes). We find that more altruistic behaviour can raise or reduce welfare, depending on the fine details of the environment. It is almost always optimal for a player to act more selfishly than her true preference. We discuss applications to a range of public good problems, including global climate policy. Our results highlight that it may be difficult to infer social preferences from observed behaviour.

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    File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1403.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1403.

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    Date of creation: 29 Jan 2014
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    Handle: RePEc:cam:camdae:1403

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    Web page: http://www.econ.cam.ac.uk/index.htm

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    Keywords: Altruism; climate policy; crowding out; public goods;

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