Can Positional Concerns Enhance the Private provision of Public Goods?
AbstractThe social welfare effect of positional concerns over public goods is composed of two parts, a positional outcome and an outcome in terms of public goods provision. When agents have homogenous positional preferences over the public good, they overinvest in the positional public good, resulting in a zero-sum positional race with a higher provision of the public good. When agents differ in their positional preferences, the overall impact on social welfare is positive when endowments are homogenous and uncertain when endowments are heterogeneous. Given that the social loss from position-seeking is lower than the social gain from rank seeking, there is an increase of social welfare. If agents have different initial endowments, positional preferences might still be welfare enhancing as long as the positional loss does not exceed the gain in terms of public good provision.
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Bibliographic InfoPaper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 10-04.
Length: 14 pages
Date of creation: Apr 2010
Date of revision: Apr 2010
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-29 (All new papers)
- NEP-CBE-2010-05-29 (Cognitive & Behavioural Economics)
- NEP-PBE-2010-05-29 (Public Economics)
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