Within-group cooperation and between-group externalities in the provision of public goods

Keisuke Hattori

International Tax and Public Finance, 2015, vol. 22, issue 2, 252-273

Abstract: Using a simple two-group model of the private provision of public goods, this paper investigates the endogenous formation of within-group cooperation. We show that the equilibrium outcomes may result in a prisoners’ dilemma, depending on the characteristics of between-group externalities. If between-group externalities are strongly positive (negative), within-group cooperation does not occur in either group, which leads to Pareto-inferior (superior) outcomes for all agents. On the other hand, if between-group externalities are weakly positive or negative, each group chooses to cooperate within a group in providing public goods, but it may reduce utility of both group members. Our simple framework is applicable to a wide variety of socio-economic problems such as an arms race, advertising competition, transboundary pollution, and antiterrorism measures. Copyright Springer Science+Business Media New York 2015

Keywords: Externalities; Private provision of public goods; Cooperation; H41; C72 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:22:y:2015:i:2:p:252-273

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DOI: 10.1007/s10797-014-9308-1

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