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Pareto improvement through unilateral matching of public good contributions: The role of commitment

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  • Buchholz, Wolfgang
  • Cornes, Richard
  • Peters, Wolfgang
  • Rübbelke, Dirk

Abstract

When providing public goods through voluntary contributions, a donor may introduce unilateral matching in order to reduce underprovision of the public good and thus inefficiency. By itself, however, matching benefits the donor but harms the recipient. We apply Cornes and Hartley’s aggregative game approach to provide a novel graphical explanation of this transfer paradox, and also show how it may be avoided by introducing a commitment device.

Suggested Citation

  • Buchholz, Wolfgang & Cornes, Richard & Peters, Wolfgang & Rübbelke, Dirk, 2015. "Pareto improvement through unilateral matching of public good contributions: The role of commitment," Economics Letters, Elsevier, vol. 132(C), pages 9-12.
    • Handle: RePEc:eee:ecolet:v:132:y:2015:i:c:p:9-12
    DOI: 10.1016/j.econlet.2015.04.003
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    1. Boadway, Robin & Song, Zhen & Tremblay, Jean-Francois, 2007. "Commitment and matching contributions to public goods," Journal of Public Economics, Elsevier, vol. 91(9), pages 1664-1683, September.
    2. Mercier Ythier, Jean, 2006. "The Economic Theory of Gift-Giving: Perfect Substitutability of Transfers and Redistribution of Wealth," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 5, pages 227-369, Elsevier.
    3. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-255, May.
    4. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 639-645, August.
    5. Roberts, Russell D, 1987. "Financing Public Goods," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 420-437, April.
    6. Boadway, Robin & Pestieau, Pierre & Wildasin, David, 1989. "Tax-transfer policies and the voluntary provision of public goods," Journal of Public Economics, Elsevier, vol. 39(2), pages 157-176, July.
    7. Richard Cornes & Roger Hartley, 2007. "Aggregative Public Good Games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 201-219, April.
    8. repec:bla:econom:v:54:y:1987:i:213:p:1-19 is not listed on IDEAS
    9. Bergstrom, Ted, 1989. "Love and Spaghetti, the Opportunity Cost of Virtue," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 165-173, Spring.
    10. Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, October.
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    Citations

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    Cited by:

    1. Christiane Reif & Dirk Rübbelke & Andreas Löschel, 2017. "Improving Voluntary Public Good Provision Through a Non-governmental, Endogenous Matching Mechanism: Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 559-589, July.
    2. Bréchet, Thierry & Hritonenko, Natali & Yatsenko, Yuri, 2016. "Domestic environmental policy and international cooperation for global commons," Resource and Energy Economics, Elsevier, vol. 44(C), pages 183-205.
    3. Wolfgang Peters & Reimund Schwarze & Anna-Katharina Topp, 2017. "Pareto Improvements Induced by Climate Funding in a Strategic Adaptation-Mitigation Framework," World Scientific Book Chapters, in: Anil Markandya & Ibon Galarraga & Dirk Rübbelke (ed.), Climate Finance Theory and Practice, chapter 9, pages 191-212, World Scientific Publishing Co. Pte. Ltd..
    4. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    5. Weifeng Liu, 2014. "Participation constraints of matching mechanisms," CAMA Working Papers 2014-63, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. Wolfgang Buchholz & Todd Sandler, 2017. "Successful Leadership in Global Public Good Provision: Incorporating Behavioural Approaches," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 591-607, July.

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    More about this item

    Keywords

    Voluntary public good provision; Matching; Commitment;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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