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A Core-Equilibrium Convergence in a Public Goods Economy

Authors


  • Nizar Allouch, Mile End Rd, E1 4 NS, London, United Kingdom (n.allouch@qmul.ac.uk).

    I am very grateful to Ted Bergstrom for his guidance and encouragement and to two anonymous referees for many helpful comments. I also thank seminar participants of the PET 2008 Workshop on Leadership, Altruism and Social Organization in Singapore, Copenhagen, Kent, and Maastricht for very helpful discussions. The hospitality that I received from the Economics Department at the University of Cambridge while revising the paper is gratefully acknowledged.

Abstract

This paper shows a core-equilibrium convergence in a public goods economy where consumers' preferences display warm glow effects. We demonstrate that if each consumer becomes satiated to other consumers' provision, then as the economy grows large the core shrinks to the set of Edgeworth allocations. Moreover, we show that an Edgeworth allocation can be decentralized as a warm glow equilibrium.

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