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Contributing or Free-Riding? Voluntary Participation in a Public Good Economy

Taiji Furusawa () and Hideo Konishi ()

No 681, Boston College Working Papers in Economics from Boston College Department of Economics

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 determine a contribution group, public good provision level, and its cost-sharing. The definition of the FRP-Core is based on credibility of coalitional deviations. The FRP-Core is always nonempty in public good economy 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 equilibrium (Bernheim, Peleg and Whinston, 1987 JET) of a dynamic game with participation decision followed by a common agency game. We illustrate the properties of the FRP-Core with an example. We also show that the equilibrium level of public good 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: C71 C72 F13 H41 (search for similar items in EconPapers)
Date: 2008-02-11, Revised 2010-08-04
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-gth, nep-pbe and nep-pol
Note: Previously circulated as "Contributing or Free-Riding? A Theory of Endogenous Lobby Formation"
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Published, Theoretical Economics 6, 219-256, 2011.

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Journal Article: Contributing or free-riding? Voluntary participation in a public good economy (2011) Downloads
Working Paper: Contributing or Free-Riding? Voluntary Participation in a Public Good Economy (2011) Downloads
Working Paper: Contributing or Free-Riding? Voluntary Participation in a Public Good Economy (2010) Downloads
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