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Nudges in network

Author

Listed:
  • Benjamin Ouvrard

    (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France)

  • Anne Stenger

    (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France
    Department of Economics, BETA-CNRS, University of Strasbourg, 61, avenue de la Forêt Noire 67085 Strasbourg Cedex)

Abstract

This paper presents a model of voluntary contributions for a local public good, with individuals in a fixed network (complete, circle, line and star), based on the model of Bramoulle and Kranton (2007). We first characterize the equilibrium conditions in the absence of external incentives. We then consider the introduction of an informational nudge (announcement of the socially optimal contribution), both under complete and incomplete information regarding individuals' positions in the network. We show that, regardless of the regulator's level of information, an informational nudge may induce higher levels of aggregate contributions in circle and complete networks, and reduces strategic uncertainty, as long as individuals' sensitivity to the nudge (or their interest in the public good that is provided) is high enough. However, in star and line networks, the level of information available to the contributions or reduce strategic uncertainty. Our main conclusion is therefore that a nudge policy should target specific individuals in specific networks. Moreover, we consider a "second best" nudge for line networks under incomplete information because the socially efficient profile of contributions may be complex to implement in such a situation.

Suggested Citation

  • Benjamin Ouvrard & Anne Stenger, 2017. "Nudges in network," Working Papers - Cahiers du LEF 2017-02, Laboratoire d'Economie Forestiere, AgroParisTech-INRA, revised Feb 2017.
  • Handle: RePEc:lef:wpaper:2017-02
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    File URL: http://www6.nancy.inra.fr/lef/Cahiers-du-LEF/2017/2017-02
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    More about this item

    Keywords

    nudge; network; local public goods; information disclosure;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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