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Private Provision of Public Goods and Information Diffusion in Social Groups

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  • Scharf, Kimberley Ann

Abstract

We describe a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity. Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbors and non-neighbors. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals’ social neighborhoods.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8607.

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Date of creation: Oct 2011
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Handle: RePEc:cpr:ceprdp:8607

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Keywords: private provision of public goods; social learning;

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  1. Chatterjee, Kalyan & Dutta, Bhaskar, 2010. "Word of Mouth Advertising, Credibility and Learning in Networks," The Warwick Economics Research Paper Series (TWERPS) 941, University of Warwick, Department of Economics.
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  6. A. Banerjee & Drew Fudenberg, 2010. "Word-of-Mouth Communication and Social Learning," Levine's Working Paper Archive 425, David K. Levine.
  7. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  8. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
  9. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  10. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
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