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The Implications of Risk and Uncertainty Aversion in Public Goods Games


  • Veronika Nemes

    () (Centre for Energy and Environmental Markets, The University of New South Wales and Victorian Government Department of Sustainability and Environment.)

  • Lata Gangadharan

    (Department of Economics, Monash University)


In this paper we examine how individuals behave in situations of risk and uncertainty in public and private goods context. We find that subjects are willing to pay a much higher amount to find out information relating to the probabilities of providing the private good than information relating to the public good even if this information has greater consequences for the individual in he public goods context. We find strong support for the free-rider hypothesis and extend it to cases when risk and uncertainty are present. We find that subjects treat risks and uncertainties associated with the provision of private good and public good differently.

Suggested Citation

  • Veronika Nemes & Lata Gangadharan, 2011. "The Implications of Risk and Uncertainty Aversion in Public Goods Games," Environmental Economics Research Hub Research Reports 10107, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:eenhrr:10107

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    References listed on IDEAS

    1. Robin M. Hogarth & Hillel J. Einhorn, 1990. "Venture Theory: A Model of Decision Weights," Management Science, INFORMS, vol. 36(7), pages 780-803, July.
    2. Lata Gangadharan & Veronika Nemes, 2005. "Impact of Risk and Uncertainty in the Provision of Local and Global Environmental Goods : An Experimental Analysis," Department of Economics - Working Papers Series 956, The University of Melbourne.
    3. Cohen, Michele & Jaffray, Jean-Yves & Said, Tanios, 1987. "Experimental comparison of individual behavior under risk and under uncertainty for gains and for losses," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(1), pages 1-22, February.
    4. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
    5. Curley, Shawn P. & Yates, J. Frank & Abrams, Richard A., 1986. "Psychological sources of ambiguity avoidance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 38(2), pages 230-256, October.
    6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    7. R. Isaac & James Walker & Susan Thomas, 1984. "Divergent evidence on free riding: An experimental examination of possible explanations," Public Choice, Springer, vol. 43(2), pages 113-149, January.
    8. Hogarth, Robin M & Kunreuther, Howard, 1989. "Risk, Ambiguity, and Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 5-35, April.
    9. Clare Chua Chow & Rakesh Sarin, 2002. "Known, Unknown, and Unknowable Uncertainties," Theory and Decision, Springer, vol. 52(2), pages 127-138, March.
    10. Kahn, Barbara E & Sarin, Rakesh K, 1988. " Modeling Ambiguity in Decisions under Uncertainty," Journal of Consumer Research, Oxford University Press, vol. 15(2), pages 265-272, September.
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