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Learning, public good provision, and the information trap

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  • Aleksander Berentsen
  • Esther Bruegger
  • Simon Loertscher

Abstract

We consider an economy where decision maker(s) do not know the true production function for a public good. By using Bayes rule they can learn from experience. We show that the economy may learn the truth, but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap. We also show that our results are robust with respect to experimentation.

Suggested Citation

  • Aleksander Berentsen & Esther Bruegger & Simon Loertscher, 2008. "Learning, public good provision, and the information trap," IEW - Working Papers 371, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:371
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    References listed on IDEAS

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    Cited by:

    1. Warren, Patrick L. & Wilkening, Tom S., 2012. "Regulatory fog: The role of information in regulatory persistence," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 840-856.

    More about this item

    Keywords

    Public economics; learning; size of government;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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