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Learning, public good provision, and the information trap

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Author Info
Aleksander Berentsen
Esther Bruegger
Simon Loertscher

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Abstract

We consider an economy where decision maker(s) do not know the true production function for a public good. By using Bayes rule they can learn from experience. We show that the economy may learn the truth, but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap. We also show that our results are robust with respect to experimentation.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp371.

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Date of creation: May 2008
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Handle: RePEc:zur:iewwpx:371

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Related research
Keywords: Public economics; learning; size of government;

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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H10 - Public Economics - - Structure and Scope of Government - - - General
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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  1. Laslier, Jean-Francois & Trannoy, Alain & Van Der Straeten, Karine, 2003. "Voting under ignorance of job skills of unemployed: the overtaxation bias," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 595-626, March. [Downloadable!] (restricted)
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  2. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 551-84, August. [Downloadable!] (restricted)
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  3. Schultz, Christian, 1996. "Polarization and Inefficient Policies," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 331-44, April. [Downloadable!] (restricted)
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  4. Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November. [Downloadable!] (restricted)
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  5. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February. [Downloadable!] (restricted)
  6. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August. [Downloadable!] (restricted)
  7. Myrdal, Gunnar, 1989. "The Equality Issue in World Development," American Economic Review, American Economic Association, vol. 79(6), pages 8-17, December. [Downloadable!] (restricted)
  8. Gregory D. Hess & Athanasios Orphanides, 2001. "War and Democracy," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 776-810, August. [Downloadable!] (restricted)
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  9. Blendon, Robert J, et al, 1997. "Bridging the Gap between the Public's and Economists' Views of the Economy," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 105-18, Summer. [Downloadable!] (restricted)
  10. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October. [Downloadable!] (restricted)
  11. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September. [Downloadable!]
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  12. Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, Elsevier, vol. 42(1), pages 48-74, January. [Downloadable!] (restricted)
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  13. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
    Other versions:
    • Timothy J. Feddersen & Wolfgang Pesendorfer, 1995. "The Swing Voter's Curse," Discussion Papers 1064, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  14. McLennan, Andrew, 1984. "Price dispersion and incomplete learning in the long run," Journal of Economic Dynamics and Control, Elsevier, vol. 7(3), pages 331-347, September. [Downloadable!] (restricted)
  15. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  16. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December. [Downloadable!] (restricted)
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