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Cursed beliefs with common-value public goods

Author

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  • Cox, Caleb
Abstract
I show how improper conditioning of beliefs can lead to under-contribution in public goods environments with interdependent values. I consider a simple model of a binary, excludable public good. In equilibrium, provision of the public good is good news about its value. Naive players who condition expectations only on their private information contribute too little, despite the absence of free-riding incentives. In a laboratory experiment, subjects indeed under-contribute relative to equilibrium. Using modified games with different belief conditioning effects, I verify that under-contribution is due to improper belief conditioning. I find little evidence of learning over multiple rounds of play.

Suggested Citation

  • Cox, Caleb, 2014. "Cursed beliefs with common-value public goods," MPRA Paper 53074, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53074
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    References listed on IDEAS

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    Cited by:

    1. Brock V Stoddard, 2015. "Probabilistic Production of a Public Good," Economics Bulletin, AccessEcon, vol. 35(1), pages 37-52.
    2. repec:ebl:ecbull:eb-14-01043 is not listed on IDEAS

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    More about this item

    Keywords

    Public goods; experiments; cursed equilibrium; game theory;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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