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Pareto meets Olson – A Note on Pareto-optimality and Group Size in Linear Public Goods Games

Michael Pickhardt

No 201174, Working Papers from Institute of Spatial and Housing Economics, Munster Universitary

Abstract: In this paper I examine the relationship between Pareto-optimality and group size in linear public goods games or experiments. In particular, I use the standard setting of homogeneous linear public goods experiments and apply a recently developed tool to identify all Pareto-optimal allocations in such settings. It turns out that under any conceivable circumstances, ceteris paribus, small groups have a higher Pareto-ratio (Pareto-optimal allocations over total allocations) than large groups. Hence, if Pareto-optimality of an allocation is a property that makes such allocations acceptable and maintainable, small groups will find is easier to provide Pareto-optimal amounts of a public good than large groups. This is a novel reasoning for Mancur Olson’s claim, in particular, with respect to what he has termed inclusive goods and inclusive groups.

Keywords: Olson; Pareto; public goods; Pareto-optimality; linear public goods experiments; inclusive groups (search for similar items in EconPapers)
JEL-codes: H41 C90 B31 (search for similar items in EconPapers)
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Working Paper: Pareto meets Olson: A note on Pareto-optimality and group size in linear public goods games (2011) Downloads
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