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A Case for Bundling Public Goods Contributions?

Author

Listed:
  • Suman Ghosh

    () (Department of Economics, College of Business, Florida Atlantic University)

  • Alexander Karaivanov

    () (Department of Economics, Simon Fraser University)

  • Mandar Oak

    () (Department of Economics, Williams College)

Abstract

We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated towards the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis-a-vis a separate contributions scheme. We show that when agents have homogeneous preferences, they cannot be made better off with a bundling scheme. On the contrary, in the generic case when agents are heterogenous in their incomes and preferences, bundling may increase joint welfare compared to a separate contribution scheme, in particular for higher income inequality among the agents. It is interesting to note that the welfare improvement occurs despite a decrease in total contributions. Our findings have implications for the design of charitable institutions and international aid agencies.

Suggested Citation

  • Suman Ghosh & Alexander Karaivanov & Mandar Oak, 2005. "A Case for Bundling Public Goods Contributions?," Working Papers 05005, Department of Economics, College of Business, Florida Atlantic University.
  • Handle: RePEc:fal:wpaper:05005
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    File URL: http://home.fau.edu/sghosh/web/gkopaper2.pdf
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    References listed on IDEAS

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    Cited by:

    1. Garth Heutel, 2014. "Crowding Out and Crowding In of Private Donations and Government Grants," Public Finance Review, , vol. 42(2), pages 143-175, March.
    2. Itaya, Jun-ichi & Mizushima, Atsue, 2016. "Should income inequality be praised? Multiple public goods provision, income distribution, and social welfare," Discussion paper series. A 298, Graduate School of Economics and Business Administration, Hokkaido University.
    3. Luca Corazzini & Christopher Cotton & Paola Valbonesi, 2013. "Too many charities? Insight from an experiment with multiple public goods and contribution thresholds," Working Papers 2013-13, University of Miami, Department of Economics.
    4. Corazzini, Luca & Cotton, Christopher & Valbonesi, Paola, 2015. "Donor coordination in project funding: Evidence from a threshold public goods experiment," Journal of Public Economics, Elsevier, vol. 128(C), pages 16-29.

    More about this item

    Keywords

    Private provision; Public goods; Bundling;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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