EXPERIMENTAL ANALYSIS OF RISK AND UNCERTAINTY IN PROVISIONING PRIVATE AND PUBLIC GOODS

Lata Gangadharan () and Veronika Nemes

Economic Inquiry, 2009, vol. 47, issue 1, 146-164

Abstract: This paper uses laboratory evidence from public goods games to examine how in payoff‐equivalent situations, decision makers contribute toward private or public goods when they are exposed to different kinds of risks and uncertainties in the provision of these goods. We find that location matters with subjects moving away from the environmental uncertainty in favor of strategic uncertainty when that uncertainty is located on the private good. When the uncertainty relates to the public good, subjects face both kinds of uncertainties on the same good, leading to a significant drop in contributions. An opportunity to reduce uncertainty increases cooperation. (JEL C90, D81, H41)

Date: 2009
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