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Contribution to a public good under subjective uncertainty

Anwesha Banerjee and Nicolas Gravel ()
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Anwesha Banerjee: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université

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Abstract: This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two-state-dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first- and second-order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision, as does any homogenization of these beliefs around their mean.

Keywords: voluntary provision; public good; uncertainty; beliefs; optimism; consensus (search for similar items in EconPapers)
Date: 2020-06
Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-02433426
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Published in Journal of Public Economic Theory, Wiley, 2020, 22 (3), pp.473-500. ⟨10.1111/jpet.12423⟩

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Journal Article: Contribution to a public good under subjective uncertainty (2020) Downloads
Working Paper: Contribution to a Public Good under Subjective Uncertainty (2019) Downloads
Working Paper: Contribution to a Public Good under Subjective Uncertainty (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02433426

DOI: 10.1111/jpet.12423

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