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Probabilistic Production of a Public Good

Author

Listed:
  • Brock V Stoddard

    (University of South Dakota)

Abstract
In a laboratory experiment, the voluntary provision of public goods is investigated when there is probabilistic uncertainty about the monetary return from production of the public good. After group members make their provision decisions, the return is drawn from an exogenously determined probability distribution. In a linear decision setting, voluntary provision of the public good is contrasted across three treatments. In the “uncertainA” treatment, the return is randomly drawn from a discrete probability distribution. In the “uncertainB” treatment, the return is drawn from a discrete probability distribution that is a mean-preserving spread of the distribution in the uncertainA treatment, but has larger variance. In the “certain” treatment, the return is known with certainty and equal to the expected value of the return in the uncertainA and uncertainB treatments. The data reveal that average provision of the public good is lower in treatments with uncertainty. However, the negative impact of uncertainty on provision only occurs when subjects experience the certain treatment prior to experiencing an uncertain treatment, suggesting an order effect to uncertainty. Also, there is evidence that subjects in treatments with higher uncertainty (variance of the public-good return) display a version of the “gambler's fallacy.”

Suggested Citation

  • Brock V Stoddard, 2014. "Probabilistic Production of a Public Good," Economics Bulletin, AccessEcon, vol. 34(4), pages 2427-2442.
    • Handle: RePEc:ebl:ecbull:eb-14-01047
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    References listed on IDEAS

    as
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    Cited by:

    1. Takeuchi, Ai & Seki, Erika, 2023. "Coordination and free-riding problems in the provision of multiple public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 206(C), pages 95-121.
    2. Cox, Caleb A., 2015. "Cursed beliefs with common-value public goods," Journal of Public Economics, Elsevier, vol. 121(C), pages 52-65.
    3. Guanlin Gao & Xinyan Shi, 2021. "Brief Mindfulness Meditation and Individual Contribution to Public Goods," Economics Bulletin, AccessEcon, vol. 41(3), pages 1303-1312.
    4. Béatrice Boulu-Reshef & Samuel H. Brott & Adam Zylbersztejn, 2017. "Does Uncertainty Deter Provision of Public Goods?," Revue économique, Presses de Sciences-Po, vol. 68(5), pages 785-791.
    5. Freundt, Jana & Lange, Andreas, 2021. "On the voluntary provision of public goods under risk," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    6. Boun My, Kene & Ouvrard, Benjamin, 2019. "Nudge and tax in an environmental public goods experiment: Does environmental sensitivity matter?," Resource and Energy Economics, Elsevier, vol. 55(C), pages 24-48.
    7. Billur Aksoy & Silvana Krasteva, 2020. "When does less information translate into more giving to public goods?," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1148-1177, December.
    8. Caleb A. Cox & Brock Stoddard, 2021. "Common-Value Public Goods and Informational Social Dilemmas," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 343-369, May.
    9. Ai Takeuchi & Erika Seki, 2023. "Overcoming problems of coordination and freeriding in a game with multiple public goods: dynamic contribution with information provision," The Japanese Economic Review, Springer, vol. 74(3), pages 379-411, July.
    10. Stoddard, Brock, 2017. "Risk in payoff-equivalent appropriation and provision games," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 78-82.
    11. Wang, Jian & Iversen, Tor & Hennig-Schmidt, Heike & Godager, Geir, 2017. "How Changes in Payment Schemes Influence Provision Behavior," HERO Online Working Paper Series 2017:2, University of Oslo, Health Economics Research Programme.
    12. Jana Freundt & Andreas Lange, 2019. "On the Impact of Risky Private and Public Returns in the Private Provision of Public Goods - The Case of Social Investments," CESifo Working Paper Series 7458, CESifo.
    13. Angela C. M. Oliveira, 2021. "When risky decisions generate externalities," Journal of Risk and Uncertainty, Springer, vol. 63(1), pages 59-79, August.
    14. Zack Dorner & Steven Tucker & Gazi Hassan, 2021. "A veil of ignorance: uncertain and ambiguous individual productivity supports stable contributions to a public good," Working Papers in Economics 21/01, University of Waikato.
    15. Dorner, Zack & Tucker, Steven & Hassan, Gazi M, 2024. "Heterogeneous productivity stabilizes public good contributions under certainty, uncertainty and ambiguity," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 110(C).
    16. Blanco, Esther & Dutcher, E. Glenn & Haller, Tobias, 2020. "Social dilemmas with public and private insurance against losses," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 924-937.
    17. Zhang, Huanren, 2019. "Common fate motivates cooperation: The influence of risks on contributions to public goods," Journal of Economic Psychology, Elsevier, vol. 70(C), pages 12-21.
    18. Vincent Théroude & Adam Zylbersztejn, 2017. "Cooperation in a risky world," Working Papers 1704, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.

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    More about this item

    Keywords

    public goods; uncertainty; laboratory experiment; cooperation;
    All these keywords.

    JEL classification:

    • H8 - Public Economics - - Miscellaneous Issues
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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