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A Competitive Equilibrium for a Warm Glow Economy

Nizar Allouch

No 641, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Despite a widespread interest in the warm glow model [Andreoni (1989,1990)], surprisingly most attention focused on the voluntary contribution equilibrium of the model, and only very little attention has been devoted to the competitive equilibrium. In this paper, we introduce the notion of competitive equilibrium for a warm glow economy [Henceforth, warm glow equilibrium]. Then, we establish (and prove), in the contest of our model, the three fundamental theorems of general equilibrium: (i) warm glow equilibrium exists; (ii) a warm glow equilibrium is Pareto efficient; and (iii) a Pareto efficient allocation can be decentralized as a warm glow equilibrium). The concept of a warm glow equilibrium may prove to be very useful to the normative and positive theory of public goods provision. First, it is a price based mechanism achieving efficient outcomes. Secondly, not only the warm glow equilibrium outcomes could serve as a point of reference to measure free-riding and welfare loss, but also due to warm glow effects, unlike Lindahl allocations, they are more likely to be achieved.

Keywords: Warm glow; Altruism; Competitive equilibrium; Free riding; Public goods provision (search for similar items in EconPapers)
JEL-codes: H41 D64 C62 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-pbe and nep-pub
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Journal Article: A competitive equilibrium for a warm-glow economy (2013) Downloads
Working Paper: A Competitive Equilibrium for a Warm Glow Economy (2009) Downloads
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