Public Goods in Information Cascades: Is There Still a Free Rider Problem?

Hin Yu Micah Cheung ()
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Hin Yu Micah Cheung: New York University, Department of Economics

A chapter in Proceedings of the 2023 International Conference on Economic Management, Financial Innovation and Public Service (EMFIPS 2023), 2024, pp 73-83 from Springer

Abstract: Abstract The phase “public goods” has been with the theories of economics for quite a long time and there are multiple ways to analyze and interpret why these goods will cause the free-rider problem. This paper suggests a variant of the basic information cascade game by introducing an idea of mutual benefit such that for each player, he receives benefit partially from himself making a correct choice and the last person making the correct choice. It is possible to design a information cascade game such that the final payoff for each player is both non-rival and non-excludable to satisfy the definition of a public good. By observing the results, we can prove that the free-rider problem still exists through a different approach. Moreover, it is possible to adjust and refine the model into such a way that even when the collective gain for each person is much larger than the private sacrifice for the person to do so, the free-rider problem still exist. In this paper, we Observe the key features of a public good and observe whether it is possible for us to obtain similar features in an information cascade game, propose a variant of the basic information cascade game, explore the threshold value for some important parameters, extend the model from 4 person to infinite and test whether it is still viable. Prove that it is possible to explain the free-rider problem in the context of information cascades, thus showing that the free-rider problem can be explained by information cascades.

Keywords: Public Goods; Information Cascade; Free-rider (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-441-9_8

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