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Social Norms and Private Provision of Public Goods

Mari Rege ()

Journal of Public Economic Theory, 2004, vol. 6, issue 1, 65-77

Abstract: The formation of social norms for voluntary contributions to a public good is analyzed in a game in which people have preferences for private consumption, a public good, and social approval. Each person chooses to be one of the two types: a contributor or a non-contributor. Thereafter, each person meets people who can observe his type. A non-contributor feels disapproval, whereas a contributor feels approval if he believes that a contributor observes his type. The game has two asymptotically stable states: one in which everybody is a contributor, and one in which nobody is a contributor. Governmental subsidization of the public good can move the society to the former state, whereas a governmental contribution to the public good can move the society to the latter. Indeed, this crowding in or crowding out prevails even after policy reversal. Copyright 2004 Blackwell Publishing Inc..

Date: 2004
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