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Finitely Repeated Voluntary Provision of a Public Good

Authors


  • Tilman Klumpp, Department of Economics, University of Alberta. Room 8-14 HM Tory Building, Edmonton, Alberta T6G 2H4, Canada (klumpp@ualberta.ca).

  • I thank Vijay Krishna, Mattias Polborn, Richard Steinberg, Xuejuan Su, Jimmy Walker, seminar audiences at the University of Illinois and IUPUI, as well as two anonymous referees and the associate editor, for their helpful comments.

Abstract

This paper theoretically explores the voluntary provision of a public good when either one of the following holds: (i) agents’ utility is the sum of their monetary earnings and a nonmaterial component, or (ii) agents’ exhibit satisficing behavior. We show that a small degree of either nonmaterial payoffs or satisficing behavior can generate large contributions in a finitely repeated game, even if the incentive to free-ride on others’ contributions calls for negligible public good provision in the static game. The equilibrium is characterized by a sharp decline in contributions toward the end of the game. Several comparative results regarding group size and technology are consistent with laboratory data obtained in experimental studies. The model also predicts the restart effect observed in previous experiments.

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