IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_7441.html
   My bibliography  Save this paper

Endogenous Timing and Income Inequality in the Voluntary Provision of Public Goods: Theory and Experiment

Author

Listed:
  • Jun-ichi Itaya
  • Atsue Mizushima
  • Kengo Kurosaka

Abstract

This paper investigates how the heterogenous incomes and preferences of potential donors affect the timing of contribution decisions when it is endogenously determined by contributors themselves. More specifically, we use a simple setting with two donors, Cobb-Douglas preferences, and complete information to investigate how income inequality affects the endogenous choices of contribution timing and the level of the voluntary supplied public goods. This paper obtains the following results. First, when income is extremely unequal, potential contributors are indifferent between the timing choices of simultaneous and sequential moves, even if they have different preferences towards a public good. Second, as income inequality decreases, the simultaneous move-game is increasingly likely to emerge, because all potential contributors prefer to act as a leader. Third, in the presence of multiple public goods, contributors with higher valuations for one public good tend to be first contributors to that one. Fourth, these theoretical predictions regarding the timing decisions of individuals are not supported by the laboratory experiment, although those regarding individuals’ contribution decisions are consistent with the experimental results.

Suggested Citation

  • Jun-ichi Itaya & Atsue Mizushima & Kengo Kurosaka, 2018. "Endogenous Timing and Income Inequality in the Voluntary Provision of Public Goods: Theory and Experiment," CESifo Working Paper Series 7441, CESifo.
  • Handle: RePEc:ces:ceswps:_7441
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7441.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
    2. Potters, Jan & Sefton, Martin & Vesterlund, Lise, 2005. "After you--endogenous sequencing in voluntary contribution games," Journal of Public Economics, Elsevier, vol. 89(8), pages 1399-1419, August.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    4. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    6. Romano, Richard & Yildirim, Huseyin, 2005. "On the endogeneity of Cournot-Nash and Stackelberg equilibria: games of accumulation," Journal of Economic Theory, Elsevier, vol. 120(1), pages 73-107, January.
    7. Konrad, Kai A, 1994. "The Strategic Advantage of Being Poor: Private and Public Provision of Public Goods," Economica, London School of Economics and Political Science, vol. 61(241), pages 79-92, February.
    8. Andreoni, James & Brown, Paul M. & Vesterlund, Lise, 2002. "What Makes an Allocation Fair? Some Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 40(1), pages 1-24, July.
    9. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185, December.
    10. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
    11. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    12. Daniele Nosenzo & Martin Sefton, 2011. "Endogenous Move Structure and Voluntary Provision of Public Goods: Theory and Experiment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 721-754, October.
    13. Steven D. Levitt & John A. List & Sally E. Sadoff, 2011. "Checkmate: Exploring Backward Induction among Chess Players," American Economic Review, American Economic Association, vol. 101(2), pages 975-990, April.
    14. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
    15. Gächter, Simon & Nosenzo, Daniele & Renner, Elke & Sefton, Martin, 2010. "Sequential vs. simultaneous contributions to public goods: Experimental evidence," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 515-522, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniele Nosenzo & Martin Sefton, 2011. "Endogenous Move Structure and Voluntary Provision of Public Goods: Theory and Experiment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 721-754, October.
    2. Daniele Nosenzo & Martin Sefton, 2011. "Endogenous Move Structure and Voluntary Provision of Public Goods: Theory and Experiment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 721-754, October.
    3. Kaplan, Todd R. & Ruffle, Bradley J. & Shtudiner, Zeev, 2018. "Cooperation through coordination in two stages," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 206-219.
    4. Roi Zultan & Eva-Maria Steiger, 2011. "See No Evil: Information Chains and Reciprocity in Teams," Working Papers 1108, Ben-Gurion University of the Negev, Department of Economics.
    5. Gregor Schwerhoff, 2013. "Leadership and International Climate Cooperation," Working Papers 2013.97, Fondazione Eni Enrico Mattei.
    6. Wolfgang Buchholz & Todd Sandler, 2017. "Successful Leadership in Global Public Good Provision: Incorporating Behavioural Approaches," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 591-607, July.
    7. Centorrino, Samuele & Concina, Laura, 2013. "A Competitive Approach to Leadership in Public Good Games," TSE Working Papers 13-383, Toulouse School of Economics (TSE).
    8. Keisuke Hattori & Mai Yamada, 2018. "Skill Diversity and Leadership in Team Production," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(2), pages 351-374, June.
    9. Bracha, Anat & Menietti, Michael & Vesterlund, Lise, 2011. "Seeds to succeed?," Journal of Public Economics, Elsevier, vol. 95(5), pages 416-427.
    10. Keisuke Hattori & Mai Yamada, 2020. "Effective Leadership Selection in Complementary Teams," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(4), pages 620-639.
    11. Riyanto, Yohanes E. & Roy, Nilanjan, 2019. "Path of intertemporal cooperation and limits to turn-taking behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 165(C), pages 21-36.
    12. Pablo Guillen & Danielle Merrett & Robert Slonim, 2015. "A New Solution for the Moral Hazard Problem in Team Production," Management Science, INFORMS, vol. 61(7), pages 1514-1530, July.
    13. Centorrino, Samuele & Concina, Laura, 2013. "A Competitive Approach to Leadership in Public Good Games," LERNA Working Papers 13.02.389, LERNA, University of Toulouse.
    14. Steiger, Eva-Maria & Zultan, Ro'i, 2014. "See no evil: Information chains and reciprocity," Journal of Public Economics, Elsevier, vol. 109(C), pages 1-12.
    15. J. Atsu Amegashie, 2016. "Public Goods, Signaling, and Norms of Conscientious Leadership," CESifo Working Paper Series 6247, CESifo.
    16. Romano, Richard & Yildirim, Huseyin, 2001. "Why charities announce donations: a positive perspective," Journal of Public Economics, Elsevier, vol. 81(3), pages 423-447, September.
    17. Russo, Giuseppe & Senatore, Luigi, 2012. "A note on contribution games with loss functions," Economics Letters, Elsevier, vol. 115(2), pages 211-214.
    18. Debraj Ray & Jean-Marie Baland & Olivier Dagnelie, 2007. "Inequality and Inefficiency in Joint Projects," Economic Journal, Royal Economic Society, vol. 117(522), pages 922-935, July.
    19. Deb, Rahul & Gazzale, Robert S. & Kotchen, Matthew J., 2014. "Testing motives for charitable giving: A revealed-preference methodology with experimental evidence," Journal of Public Economics, Elsevier, vol. 120(C), pages 181-192.

    More about this item

    Keywords

    Nash equilibrium; Stackelberg equilibrium; public good; endogenous timing; voluntary provision; income distribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_7441. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.