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Dynamic voluntary contribution to a public project under time inconsistency

Ahmet Altınok and Murat Yılmaz

Journal of Economic Behavior & Organization, 2018, vol. 145, issue C, 114-140

Abstract: We study a general voluntary public good provision model and introduce time inconsistency through β-δ preferences. There is a public project and finitely many agents where each agent is allowed to contribute any amount she likes in any period she likes before the project is completed. The agents have discontinuous preferences over the total contribution with a jump when the project is completed. There is complete information about the environment but imperfect information about others’ individual actions: in each period, each agent observes only the total contribution made, not other agents’ individual contributions. Assuming the agents are time-inconsistent and sophisticated, we characterize the set of equilibria. We compare the set of equilibrium outcomes under sophisticated time-inconsistent agents to that under time-consistent agents. More importantly, we show that for any given project that is completed in finite time by time-consistent agents, sophisticated time-inconsistent agents complete the project earlier than time-consistent agents.

Keywords: Public good; Dynamic voluntary contribution; Time inconsistency; β-δ preferences; Sophisticated agent (search for similar items in EconPapers)
JEL-codes: D03 H41 C72 (search for similar items in EconPapers)
Date: 2018
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