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A Case for Bundling Public Goods Contributions

Suman Ghosh (), Alexander Karaivanov () and Mandar Oak ()

Journal of Public Economic Theory, 2007, vol. 9, issue 3, 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.

Date: 2007
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Working Paper: A Case for Bundling Public Goods Contributions? (2005) Downloads
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Handle: RePEc:bla:jpbect:v:9:y:2007:i:3:p:425-449