Private provision of public goods under price uncertainty

In this paper, price uncertainty is introduced into the model of voluntary provision of public goods. The analysis is carried out depending upon whether individuals make real or nominal contributions. We highlight the significant factors that determine the complex effects of changes in uncertainty o...

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Bibliographic Details
Published in:Social choice and welfare 1993-10, Vol.10 (4), p.371-382
Main Authors: Gradstein, Mark, Nitzan, Shmuel, Slutsky, Steven
Format: Article
Language:English
Subjects:
Arithmetic mean
Economic uncertainty
Equilibrium models
Free rider effect
Nash equilibrium
Price uncertainty
Private goods
Public goods
Risk aversion
Taxation
Utility functions
Utility rates
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Summary:In this paper, price uncertainty is introduced into the model of voluntary provision of public goods. The analysis is carried out depending upon whether individuals make real or nominal contributions. We highlight the significant factors that determine the complex effects of changes in uncertainty on the level of provision, the level of welfare, and the gaps between equilibrium and optimal values of these variables. In particular, we show that in some situations it would be desirable to introduce artificial randomness in prices in order to alleviate the free rider problem and to increase welfare.
ISSN:0176-1714
1432-217X
DOI:10.1007/bf00182512