A Case for Bundling Public Goods Contributions

suman Ghosh (), Alexander K. Karaivanov () and Mandar Oak ()

Journal of Public Economic Theory, 2007, vol. 9, issue 3, pages 425-449

Abstract: We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated toward the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis-à-vis a separate contributions scheme. We show that for high income inequality or for identical preferences among agents bundling leads to higher joint welfare. Interestingly, a welfare improvement can in some cases occur despite a decrease in total contributions. On the contrary, when agents are heterogenous, for low income inequality bundling can lead to lower total contributions and may decrease welfare compared to a separate contribution scheme. Our findings have implications for the design of charitable institutions and international aid agencies. Copyright 2007 Blackwell Publishing, Inc..

Date: 2007

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Working Paper: A Case for Bundling Public Goods Contributions? (2005)
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