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 good provision level, and its cost-sharing. The FRP-Core is always nonempty in public good 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 equilibrium (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 FRPCore with an example. We also show that the equilibrium level of public good shrinks to zero as the economy is replicated.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-128.
Date of creation: Mar 2010
Date of revision:
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:
- Konishi, Hideo & Furusawa, Taiji, 2011. "Contributing or free-riding? Voluntary participation in a public good economy," Theoretical Economics, Econometric Society, vol. 6(2), May.
- 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.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-GTH-2010-04-17 (Game Theory)
- NEP-PBE-2010-04-17 (Public Economics)
- NEP-POL-2010-04-17 (Positive Political Economics)
- NEP-PUB-2010-04-17 (Public Finance)
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