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Dynamics of Provision of Threshold Public Goods

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  • Arnaud Dragicevic
  • Jim Engle-Warnick

Abstract

Agents face an ambiguous risk of biodiversity survival as well as ambiguous expected losses from its extinction. As a collectivity, agents are faced with the option of privately funding the protection of biodiversity for biomedical research. We propose two evolutionary models of threshold public goods game and public goods option market, where we consider population dynamics with proportional fair-share contributors versus free-riders. In the first model, we find that agents contribute both in null and ambiguous survival scenarios. In the second model, in case of ambiguous survival, the public good is provided when the agents exchanging option contracts are equally divided into buyers and sellers. This result holds for a specific market belief over the species survival. However, the absence of surplus captured on the option market condemns its raison d'être. Low risk will provoke unconditional social free-riding in both models. Les agents font face à un risque ambigu quant à la survie de la biodiversité ainsi qu'à des pertes espérées ambiguës de par leur extinction. En tant que collectivité, les agents ont la possibilité de financer, à titre privé, la protection de la biodiversité à des fins de recherche biomédicale. Nous proposons deux modèles évolutionnaires de jeu du bien public avec seuil et de marché des options sur bien public, où nous considérons la dynamique des populations composées de contributeurs à hauteur de leur juste part proportionnelle et de passagers clandestins. Dans le premier modèle, nos résultats montrent que les agents contribuent aussi bien dans les scénarios de survie nulle que de survie ambiguë. Dans le second modèle, le bien public est fourni lorsque les agents négociant les contrats d'options sont identiquement divisés entre acheteurs et vendeurs. Ce résultat se vérifie pour une croyance spécifique du marché sur la survie des espèces. Néanmoins, l'absence de surplus capté sur le marché des options condamne sa raison d'être. Un risque faible provoquera un comportement de passager clandestin inconditionnel dans les deux modèles.

Suggested Citation

  • Arnaud Dragicevic & Jim Engle-Warnick, 2011. "Dynamics of Provision of Threshold Public Goods," CIRANO Working Papers 2011s-50, CIRANO.
  • Handle: RePEc:cir:cirwor:2011s-50
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    File URL: http://www.cirano.qc.ca/files/publications/2011s-50.pdf
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    Keywords

    biodiversity; ambiguity; threshold public goods; option markets; prediction markets; evolutionary game theory; biodiversité; ambiguïté; biens publics avec seuil; marchés d'options; marchés de prédiction; théorie des jeux évolutionnaires;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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