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Learning, public good provision, and the information trap

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  • Berentsen, Aleksander
  • Bruegger, Esther
  • Loertscher, Simon

Abstract

We consider an economy with uncertainty about the true production function for a public good. By using Bayes rule the economy can learn from experience. We show that it 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 small experimentation.

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  • Berentsen, Aleksander & Bruegger, Esther & Loertscher, Simon, 2008. "Learning, public good provision, and the information trap," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 998-1010, June.
    • Handle: RePEc:eee:pubeco:v:92:y:2008:i:5-6:p:998-1010
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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