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A Competitive Equilibrium for a Warm Glow Economy

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  • Nizar Allouch

    (Queen Mary, University of London)

Abstract

Despite a widespread interest in the warm glow model [Andreoni (1989,1990)], surprisingly most attention focused on the voluntary contribution equilibrium of the model, and only very little attention has been devoted to the competitive equilibrium. In this paper, we introduce the notion of competitive equilibrium for a warm glow economy [Henceforth, warm glow equilibrium]. Then, we establish (and prove), in the contest of our model, the three fundamental theorems of general equilibrium: (i) warm glow equilibrium exists; (ii) a warm glow equilibrium is Pareto efficient; and (iii) a Pareto efficient allocation can be decentralized as a warm glow equilibrium). The concept of a warm glow equilibrium may prove to be very useful to the normative and positive theory of public goods provision. First, it is a price based mechanism achieving efficient outcomes. Secondly, not only the warm glow equilibrium outcomes could serve as a point of reference to measure free-riding and welfare loss, but also due to warm glow effects, unlike Lindahl allocations, they are more likely to be achieved.

Suggested Citation

  • Nizar Allouch, 2009. "A Competitive Equilibrium for a Warm Glow Economy," Working Papers 641, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:641
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    Cited by:

    1. Carvajal, Andrés & Song, Xinxi, 2022. "A simple(r) Lindahl solution to the provision of public goods with warm-glow: Efficiency and implementation," Economics Letters, Elsevier, vol. 211(C).
    2. Carvajal, Andrés & Song, Xinxi, 2018. "Testing Pareto efficiency and competitive equilibrium in economies with public goods," Journal of Mathematical Economics, Elsevier, vol. 75(C), pages 19-30.
    3. Nizar Allouch, 2010. "A Core‐Equilibrium Convergence in a Public Goods Economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 857-870, August.
    4. Carvajal, Andrés & Song, Xinxi, 2022. "Implementing Lindahl allocations in a warm-glow economy," Economics Letters, Elsevier, vol. 217(C).
    5. Simone D'Alessandro & Domenico Fanelli, 2015. "The Role of Income Distribution in the Diffusion of Corporate Social Responsibility," Metroeconomica, Wiley Blackwell, vol. 66(2), pages 187-212, May.
    6. Vadim Cherepanov & Tim Feddersen & Alvaro Sandroni, 2013. "Revealed preferences and aspirations in warm glow theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 501-535, November.

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    More about this item

    Keywords

    Warm glow; Altruism; Competitive equilibrium; Free riding; Public goods provision;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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