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Optimal Altruism in Public Good Provision

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  • Robert Hahn
  • Robert Ritz

Abstract

We present a model of altruistically-minded-yet rational-players contributing to a public good. A key feature is the tension between altruism and "crowding-out" effects (players' efforts are strategic substitutes). We find that more altruistic behaviour can raise or reduce welfare, depending on the fine details of the environment. It is almost always optimal for a player to act more selfishly than her true preference. We discuss applications to a range of public good problems, including global climate policy. Our results highlight that it may be difficult to infer social preferences from observed behaviour.

Suggested Citation

  • Robert Hahn & Robert Ritz, 2014. "Optimal Altruism in Public Good Provision," Cambridge Working Papers in Economics 1403, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1403
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1403.pdf
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    References listed on IDEAS

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    Cited by:

    1. Yu Hsuan LIN, 2018. "How Does Altruism Enlarge A Climate Coalition," Journal of Advanced Research in Management, ASERS Publishing, vol. 9(3), pages 553-563.

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    More about this item

    Keywords

    Altruism; climate policy; crowding out; public goods;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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