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Dynamic Voluntary Contribution to a Public Project under Time-Inconsistency

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  • Ahmet Altiok
  • Murat Yilmaz

Abstract

We study a general voluntary public good provision model and introduce time inconsistency through β-δ preferences. There is a public project and finitely many agents where each agent is allowed to contribute any amount she likes in any period she likes before the project is completed. The agents have discontinuous preferences over the total contribution with a jump when the project is completed. There is complete information about the environment but imperfect information about others’ individual actions: in each period, each agent observes only the total contribution made, not other agents’ individual contributions. Assuming the agents are time-inconsistent and sophisticated, we characterize the set of equilibria. We compare the set of equilibrium outcomes under sophisticated time-inconsistent agents to that under time-consistent agents. More importantly, we show that for any given project that is completed in finite time by time-consistent agents, sophisticated time-inconsistent agents complete the project earlier than time-consistent agents.
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Suggested Citation

  • Ahmet Altiok & Murat Yilmaz, 2014. "Dynamic Voluntary Contribution to a Public Project under Time-Inconsistency," Working Papers 2014/08, Bogazici University, Department of Economics.
  • Handle: RePEc:bou:wpaper:2014/08
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    Cited by:

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    2. Weinschenk, Philipp, 2021. "On the benefits of time-inconsistent preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 185-195.

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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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