Incentives for the over-provision of public goods

Michael Sacks

Journal of Economic Behavior & Organization, 2021, vol. 191, issue C, 197-213

Abstract: A wide range of public goods, such as open source software, possess two often-ignored features: (i) excludable and potentially rivalrous contribution benefits (e.g. status seeking) and (ii) nonexcludable and nonrival consumption costs (e.g. adoption costs). I develop a model of the voluntary provision of public goods that incorporates these features. I find that these additional features mitigate the well-known incentive problems, but introduce new ones. Costly consumption lessens the free-rider problem, leading to more efficient provision. Private benefits similarly reduce the free-rider problem, but can lead to over-provision via a negative congestion externality on the supply side. Status-seeking induces an increase in contributions to the benefit of each contributor but imposes a cost on all other consumers and contributors. Efforts to maximize welfare by a community leader or social planner often involve transferring surpluses from consumers to producers.

Keywords: Congestion; Free riding; Negative externalities; Over-provision; Positive externalities; Public goods; Under-provision (search for similar items in EconPapers)
JEL-codes: C72 D29 D62 D71 H41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:191:y:2021:i:c:p:197-213

DOI: 10.1016/j.jebo.2021.08.033

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