Private provision of public goods and information diffusion in social groups

We describe a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity. Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbours and non-neighbours. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbours. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals’ social neighbourhoods

The Profile of a “Warm-Glower”: A Note on Consumer’s Behavior and Public Policy Implications

The paper focuses on the ongoing debate on non-market valuation, including the valuation environmental goods, and the opportunity to use contingent valuation for policy guidance. In fact, contingent valuation critics argue that reported willingness to pay answers do not reflect real economic preferences and, for this reason, should not be used in cost-benefit analysis The attempt to contravene such critique finds many supporters. This paper starts from the latter stream of research and adds two original contributions. First, it sheds light on the individual warm glow motivational profile, exploring the empirical relationship between individual’s socio-economic characteristics and warm glow. Second, it discusses some implications of the presence of warm glow for public policy.Economic value, Contingent valuation, Willingness to pay; Latent factor, Consumer motivations, Warm glow, Ego driven warm glow, Social oriented warm glow, Public policy design

Private Provision of Public Goods and Information Diffusion in Social Groups

We describe a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity. Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbours and non-neighbours. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbours. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals’ social neighbourhoods.Private provision of public goods, social learning

Competitive Charitable Giving and Optimal Public Policy with Multiple Equilibria

Consider a large number of small individuals contributing to a charity or to a public good. We study the properties of a competitive equilibrium in giving and allow for multiple equilibria. Our proposed condition, aggregate strategic complementarity, is a necessary condition for multiple equilibria. Consider two equilibria with low (L) and high (H) levels of giving. Comparative statics at L could be perverse (subsidies reduce giving) while those at H could be normal (subsidies induce giving), which rules out the use of incentives at L. We demonstrate how public policy, in the form of temporary direct government grants to charity can engineer a move from L to H. We use a welfare analysis to determine the optimal mix of private and public contributions to charity. Our paper contributes to the broader and more fundamental question of using public policy to engineer moves between multiple equilibria. Multiple equilibria; privately supplied public goods; aggregate strategic substitutes and complements; competitive and non-cooperative equilibria; direct grants; charitable redistribution; voluntary contributions to public goods; optimal mix of public and private giving.

Charitable Giving and Optimal Public Policy in a Competitive Equilibrium with Multiple Equilibria.

In a competitive-equilibrium analysis of giving to charity, we show that strategic complementarity between individual giving and aggregate giving can lead to multiple equilibria. This provides a possible explanation for observed heterogeneity in giving. It is possible, but not necessary, that at a low equilibrium in giving (LE), an increase in subsidy reduces giving (perverse comparative statics) while at a high equilibrium (HE) the comparative statics are normal (subsidies promote giving). The perverse comparative statics at LE preclude using subsidies to move the economy to HE. We show how temporary direct government grants can engineer a permanent move from LE to HE. Once HE is established, the optimal mix of private and public giving is determined using a welfare analysis. We show that the Nash non-cooperative outcome is virtually identical to the competitive-equilibrium, even for relatively small numbers of givers. The competitive-equilibrium approach is more tractable and plausible, and more general because it does not rely on a symmetric equilibrium. We also show how our results are applicable to redistributive and public good contexts.Multiple Equilibria; Aggregate Strategic Substitutes and Complements; Competitive and Non-cooperative Equilibria; Direct Grants; Charitable Redistribution; Voluntary Contributions to Public Goods; Optimal Mix of Public and Private Giving.

Cost-(in)effective public good provision: an experimental exploration

This paper investigates the determinants of cost-(in)effective giving to public goods. We conduct a pre-registered experiment to elucidate how factors at the institutional and individual levels shape individual contributions and the cost-effectiveness of those contributions in a novel public good game. In particular, we examine the role of consequential uncertainty over the value of public good contributions (institutional level) as well as individual characteristics like risk and ambiguity attitudes, giving type, and demographics (individual level). We find cost-ineffective contributions in all institutions, but total contribution levels and the degree of cost-ineffectiveness are similar across institutions. Meanwhile, cost-effectiveness varies by giving type—which is a novel result that is consistent with hypotheses we generate from theory—but other individual characteristics have little influence on the cost-effectiveness of contributions. Our work has important positive and normative implications for charitable giving and public good provision in the real world, and it is particularly germane to emerging online crowdfunding and patronage platforms that confront users with a multitude of competing opportunities for giving

Media Coverage & Charitable Giving After the 2004 Tsunami

Media coverage of humanitarian crises is widely believed to influence charitable giving, yet this assertion has received little empirical scrutiny. Using Internet donations after the 2004 tsunami as a case study, we show that media coverage of disasters has a dramatic impact on donations to relief agencies, with an additional minute of nightly news coverage increasing donations by 0.036 standard deviations from the mean, or 13.2% of the average daily donation for the typical relief agency. Similarly, an additional 700-word story in the New York Times or Wall Street Journal raises donations by 18.2% of the daily average. These results are robust to controls for the timing of news coverage and tax considerations. We repeat the analysis using instrumental variables to account for endogeneity bias, and the estimates are unchanged. However, we also find that the effect of news coverage varies considerably by relief agency.http://deepblue.lib.umich.edu/bitstream/2027.42/57235/1/wp855 .pd

THE ROLE OF NETWORKS IN COLLECTIVE ACTION WITH COSTLY COMMUNICATION.

Individuals frequently contribute their resources voluntarily to provide public goods. This paper models the manner in which the linkage between members in a community influences the likelihood of such actions through spontaneous activism in networks. The model I use abstracts from the issue of free-riding behavior by means of small deviations from standard preferences. Instead, it concentrates on the communication aspect of provision through collective action. The solution concept is Nash equilibrium. I find that the likelihood of efficient provision of a discrete public good in random social networks increases very rapidly for parameter values where the network experiences a phase transition and large-scale decentralized activism becomes feasible. As a result, the model shows that successful coordination may be more readily achieved the larger the population is, provided its members are sufficiently connected. In contrast with previous results in the literature, this results holds even as the size of the population increases without bound, and it is consistent with the existence of largescale activism in large populations.Collective Action

Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers

This paper has two goals. First, we discuss several emerging approaches to applied welfare analysis under non-standard ("behavioral") assumptions concerning consumer choice. This provides a foundation for Behavioral Public Economics. Second, we illustrate applications of these approaches by surveying behavioral studies of policy problems involving saving, addiction, and public goods. We argue that the literature on behavioral public economics, though in its infancy, has already fundamentally changed our understanding of public policy in each of these domains.

Increasing Fundraising Success by Decreasing Donor Choice

Suggested contributions, membership categories, and discrete, incremental thank-you gifts are devices often used by benevolent associations that provide public goods. Such devices focus donations into discrete levels, thereby effectively limiting the donors' freedom to give. We study the effects on overall donations of the tradeoff between rigid schemes that severely restrict the choices of contribution on the one hand, and flexible membership contracts on the other, taking into account the strategic response of contributors whose values for the public good are private information. We show flexibility dominates when i) the dispersion of donors' taste for the public good increases, ii) the number of potential donors increases, and iii) there is greater funding by an external authority. Using the number of default membership categories that National Public Radio stations offer as proxy for flexibility, we document the existence of empirical correlations consistent with our predictions: stations offer a larger number of suggested contribution levels as i) the incomes of the population served become more diverse, ii) the population of the coverage area increases, and iii) there is greater external support from the Corporation for Public Broadcasting.private provision, categories, restricting donations, heterogeneity, crowding out