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A Case for Bundling Public Goods Contributions?

Suman Ghosh (), Alexander Karaivanov () and Mandar Oak ()

No 5005, Working Papers from Department of Economics, College of Business, Florida Atlantic University

Abstract: We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated towards the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis-a-vis a separate contributions scheme. We show that when agents have homogeneous preferences, they cannot be made better off with a bundling scheme. On the contrary, in the generic case when agents are heterogenous in their incomes and preferences, bundling may increase joint welfare compared to a separate contribution scheme, in particular for higher income inequality among the agents. It is interesting to note that the welfare improvement occurs despite a decrease in total contributions. Our findings have implications for the design of charitable institutions and international aid agencies.

Keywords: Private provision; Public goods; Bundling (search for similar items in EconPapers)
JEL-codes: H41 D61 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-06
New Economics Papers: this item is included in nep-mic and nep-pbe
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Journal Article: A Case for Bundling Public Goods Contributions (2007) Downloads
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