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Private Provision of Public Goods and Information Diffusion in Social Groups

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  • Scharf, Kimberley

Abstract

We describe a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity. Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbors and non-neighbors. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals’ social neighborhoods.

Suggested Citation

  • Scharf, Kimberley, 2011. "Private Provision of Public Goods and Information Diffusion in Social Groups," CEPR Discussion Papers 8607, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8607
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    References listed on IDEAS

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    1. Gale, Douglas & Kariv, Shachar, 2003. "Bayesian learning in social networks," Games and Economic Behavior, Elsevier, vol. 45(2), pages 329-346, November.
    2. Chatterjee, Kalyan & Dutta, Bhaskar, 2010. "Word of Mouth Advertising, Credibility and Learning in Networks," The Warwick Economics Research Paper Series (TWERPS) 941, University of Warwick, Department of Economics.
    3. Glenn Ellison & Drew Fudenberg, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 93-125.
    4. Aumann, Robert J., 1974. "Subjectivity and correlation in randomized strategies," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 67-96, March.
    5. 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.
    6. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    7. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
    8. Kalyan Chatterjee & Bhaskar Dutta, 2016. "Credibility And Strategic Learning In Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 759-786, August.
    9. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    10. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
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    Cited by:

    1. repec:kap:itaxpf:v:24:y:2017:i:6:d:10.1007_s10797-017-9474-z is not listed on IDEAS
    2. Leonardo Becchetti & Vittorio Pelligra & Tommaso Reggiani, 2017. "Information, belief elicitation and threshold effects in the 5X1000 tax scheme: a framed field experiment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1026-1049, December.
    3. Scharf, Kimberley & Smith, Sarah, 2014. "Relational Warm Glow and Giving in Social Groups," CEPR Discussion Papers 10051, C.E.P.R. Discussion Papers.
    4. repec:bri:cmpowp:13/327 is not listed on IDEAS
    5. Scharf, Kimberley & Smith, Sarah, 2016. "Relational altruism and giving in social groups," Journal of Public Economics, Elsevier, vol. 141(C), pages 1-10.

    More about this item

    Keywords

    private provision of public goods; social learning;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H1 - Public Economics - - Structure and Scope of Government
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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