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A Rationale for Non-Monotonic Group-Size Effect in Repeated Provision of Public Goods

  • Wang, Chengsi
  • Zudenkova, Galina

This paper analyzes the impact of a group-size change on contributing incentives in repeated provision of pure public goods. We develop a model in which the group members interact repeatedly and might be temporarily constrained to contribute to the public goods production. We show that an increase in the group size generates two opposite effects - the standard free-riding effect and the novel large-scale effect, which enhances cooperative incentives. Our results indicate that the former effect dominates in relatively large groups whilethe latter in relatively small groups. We provide therefore a rationale for nonmonotonic group-size effect which is consistent with the previous empirical and experimental findings.

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File URL: http://ub-madoc.bib.uni-mannheim.de/35259/1/Wang_und_Zudenkova_14%2D03.pdf
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Paper provided by University of Mannheim, Department of Economics in its series Working Papers with number 14-03.

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Date of creation: 2014
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Handle: RePEc:mnh:wpaper:35259
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  1. Fershtman, C. & Nitzan, S., 1988. "Dynamic Voluntary Provision Of Public Goods," Papers 21-88, Tel Aviv.
  2. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  3. Steinberg, Richard S, 1987. "Voluntary Donations and Public Expenditures in a Federal System," American Economic Review, American Economic Association, vol. 77(1), pages 24-36, March.
  4. 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 464-77, June.
  5. Dilip Abreu & Paul Milgrom & David Pearce, 1997. "Information and timing in repeated partnerships," Levine's Working Paper Archive 636, David K. Levine.
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  8. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
  9. Szentes, Balazs & Koriyama, Yukio, 2009. "A resurrection of the Condorcet Jury Theorem," Theoretical Economics, Econometric Society, vol. 4(2), June.
  10. Leslie M. Marx & Steven A. Matthews, . "Dynamic Voluntary Contribution to a Public Project," Penn CARESS Working Papers 6f8dbf67d492ff8a10975496b, Penn Economics Department.
  11. Goeree, Jacob K. & Holt, Charles A. & Laury, Susan K., 2002. "Private costs and public benefits: unraveling the effects of altruism and noisy behavior," Journal of Public Economics, Elsevier, vol. 83(2), pages 255-276, February.
  12. R. M. Isaac & J. M. Walker, 2010. "Group size effects in public goods provision: The voluntary contribution mechanism," Levine's Working Paper Archive 310, David K. Levine.
  13. Andreoni, James, 2007. "Giving gifts to groups: How altruism depends on the number of recipients," Journal of Public Economics, Elsevier, vol. 91(9), pages 1731-1749, September.
  14. Pecorino, Paul, 1999. "The effect of group size on public good provision in a repeated game setting," Journal of Public Economics, Elsevier, vol. 72(1), pages 121-134, April.
  15. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  16. Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 351-67, July.
  17. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  18. Xiaoquan (Michael) Zhang & Feng Zhu, 2011. "Group Size and Incentives to Contribute: A Natural Experiment at Chinese Wikipedia," American Economic Review, American Economic Association, vol. 101(4), pages 1601-15, June.
  19. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  20. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 589-614, 07.
  21. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
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