Contributing or free-riding? Voluntary participation in a public good economy

Taiji Furusawa () and Hideo Konishi ()

Theoretical Economics, 2011, vol. 6, issue 2

Abstract: We consider a (pure) public goods provision problem with voluntary participation in a quasi-linear economy. We propose a new hybrid solution concept, the free-riding-proof core (FRP-Core), which endogenously determines a contribution group, public goods provision level, and how to share the provision costs. The FRP-Core is always nonempty in public goods economies but does not usually achieve global efficiency. The FRP-Core has support from both cooperative and noncooperative games. In particular, it is equivalent to the set of perfectly coalition-proof Nash equilibria (Bernheim, Peleg, and Whinston, 1987) of a dynamic game with players' participation decisions followed by a common agency game of public goods provision. We illustrate various properties of the FRP-Core with an example. We also show that the equilibrium level of public goods shrinks to zero as the economy is replicated.

Keywords: Endogenous coalition formation; externalities; public good; perfectly coalition-proof Nash equilibrium; free riders; free-riding-proof core; lobbying; common agency game (search for similar items in EconPapers)
JEL-codes: H41 C71 C72 D61 D72 (search for similar items in EconPapers)
Date: 2011-05-03
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Related works:
Working Paper: Contributing or Free-Riding? Voluntary Participation in a Public Good Economy (2011)
Working Paper: Contributing or Free-Riding? Voluntary Participation in a Public Good Economy (2010)
Working Paper: Contributing or Free-Riding? Voluntary Participation in a Public Good Economy (2010)
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