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Equilibrium Contributions and “Locally Enjoyed” Public Goods

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  • Luca Corazzini

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    (Department of Economics, University of Milan-Bicocca)

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    Abstract

    The main results of the traditional theory of private provision of public goods in the case of identical individuals are: 1) there exists a unique Nash equilibrium pattern of contributions in which everybody contributes the same amount (Bergstrom et al. [1986]); 2) this pattern is locally stable (Cornes [1980]). Under homothetic preferences, I show that these results generally no longer hold in the context of “locally enjoyed” public goods. In particular, when the symmetric Nash equilibrium is not the unique equilibrium pattern, it is locally unstable and there exists at least a locally stable asymmetric Nash equilibrium.

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    File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper84.pdf
    File Function: First version, 2004
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    Bibliographic Info

    Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 84.

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    Length: 31 pages
    Date of creation: Nov 2004
    Date of revision: Nov 2004
    Handle: RePEc:mib:wpaper:84

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    Keywords: Local Interaction; Public Goods; Nash Equilibria;

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    References

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    1. 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.
    2. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
    3. Cornes, Richard, 1979. "External Effects : An Alternative Formulation," The Warwick Economics Research Paper Series (TWERPS) 159, University of Warwick, Department of Economics.
    4. Theodore C. Bergstrom & Oded Stark, 1994. "How Altruism Can Prevail in an Evolutionary Environment," Microeconomics 9401001, EconWPA.
    5. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
    6. Sandmo, Agnar, 1980. "Anomaly and Stability in the Theory of Externalities," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 799-807, June.
    7. 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.
    8. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
    9. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
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