Public goods with ambiguity in large economies

Narayana Kocherlakota and Yangwei Song

Journal of Economic Theory, 2019, vol. 182, issue C, 218-246

Abstract: We consider a canonical problem in economics: the financing and provision of a public good. Mailath and Postlewaite (1990) show that under natural information and enforcement frictions, the probability of providing the public good falls to zero as the population size goes to infinity even if provision of the public good is efficient. In this paper, we allow agents to have multiple prior beliefs about others' valuations and to make choices that reflect their aversion to that ambiguity. We show that, as long as each agent's set of priors contains some distribution of valuations under which provision is inefficient, it is possible to find a mechanism in large economies that finances provision of the public good.

Keywords: Efficient provision; Public goods; Ambiguity aversion; Large economies (search for similar items in EconPapers)
JEL-codes: D61 D82 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:182:y:2019:i:c:p:218-246

DOI: 10.1016/j.jet.2019.04.007

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