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Cursed beliefs with common-value public goods

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  • Cox, Caleb A.

Abstract

I show how improper conditioning of beliefs can reduce contribution in public goods environments with interdependent values. I consider a simple model of a binary, excludable public good. In equilibrium, provision of the public good is good news about its value. Naive players who condition expectations only on their private information contribute too little, despite the absence of free-riding incentives. In a laboratory experiment, contributions indeed fall short of the equilibrium prediction. Using modified games with different belief-conditioning effects, I verify that subjects fail to condition beliefs properly. However, improper belief conditioning cannot fully explain the results.

Suggested Citation

  • Cox, Caleb A., 2015. "Cursed beliefs with common-value public goods," Journal of Public Economics, Elsevier, vol. 121(C), pages 52-65.
  • Handle: RePEc:eee:pubeco:v:121:y:2015:i:c:p:52-65
    DOI: 10.1016/j.jpubeco.2014.11.006
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    References listed on IDEAS

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    Cited by:

    1. Caleb A. Cox & Brock Stoddard, 2018. "Common-Value Public Goods and Informational Social Dilemmas," Working Papers 18-04, Department of Economics, Appalachian State University.
    2. Theodore L. Turocy & Timothy N. Cason, 2015. "Bidding in first-price and second-price interdependent-values auctions: A laboratory experiment," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-23, School of Economics, University of East Anglia, Norwich, UK..
    3. repec:kap:expeco:v:21:y:2018:i:2:d:10.1007_s10683-017-9545-0 is not listed on IDEAS

    More about this item

    Keywords

    Public goods; Experiments; Cursed equilibrium; Game theory;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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