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Contribution to a Public Good under Subjective Uncertainty

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Abstract

This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two-state-dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first and second order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision provision, as does any homogenization of these beliefs around their mean.

Suggested Citation

  • Anwesha Banerjee & Nicolas Gravel, 2019. "Contribution to a Public Good under Subjective Uncertainty," AMSE Working Papers 1923, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:1923
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    Cited by:

    1. Billette de Villemeur, Etienne & Cea-Echenique, Sebastián & Cuevas, Conrado, 2022. "Revisiting the impact of uncertainty in the private provision of public goods," MPRA Paper 114888, University Library of Munich, Germany.
    2. Anwesha Banerjee & Stefano Barbieri & Kai A. Konrad, 2022. "Climate Policy, Irreversibilities and Global Economic Shocks," Working Papers tax-mpg-rps-2022-11, Max Planck Institute for Tax Law and Public Finance.
    3. Banerjee, Anwesha, 2024. "The effect of heterogeneity and risk on co-operation: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).

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    More about this item

    Keywords

    voluntary provision; public good; uncertainty; beliefs; optimism; consensus;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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