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Learning, public good provision, and the information trap

Aleksander Berentsen (), Esther Bruegger and Simon Loertscher ()

No 371, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: We consider an economy where decision maker(s) do not know the true production function for a public good. By using Bayes rule they can learn from experience. We show that the economy may learn the truth, but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap. We also show that our results are robust with respect to experimentation.

Keywords: Public economics; learning; size of government (search for similar items in EconPapers)
JEL-codes: D72 D83 H10 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-cba, nep-cdm and nep-pbe
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