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Contribution to a public good under subjective uncertainty

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  • Anwesha Banerjee

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Nicolas Gravel

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two-state-dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first- and second-order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision, as does any homogenization of these beliefs around their mean.

Suggested Citation

  • Anwesha Banerjee & Nicolas Gravel, 2023. "Contribution to a public good under subjective uncertainty," Working Papers hal-02433426, HAL.
    • Handle: RePEc:hal:wpaper:hal-02433426
    DOI: 10.1111/jpet.12423
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02433426
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    References listed on IDEAS

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    Cited by:

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    2. Banerjee, Anwesha, 2024. "The effect of heterogeneity and risk on co-operation: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    3. Anwesha Banerjee & Stefano Barbieri & Kai A. Konrad, 2022. "Climate Policy, Irreversibilities and Global Economic Shocks," Working Papers tax-mpg-rps-2022-11, Max Planck Institute for Tax Law and Public Finance.

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    More about this item

    Keywords

    voluntary provision; public good; uncertainty; beliefs; optimism; consensus;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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