Contributing or Free-Riding? Voluntary Participation in a Public Good Economy

Author Name FURUSAWA Taiji  (Faculty Fellow, RIETI / Hitotsubashi University) /KONISHI Hideo  (Boston College)
Creation Date/NO. March 2011 11-E-028
Research Project The Design of an International Institution to Prevent Global Warming
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We consider a (pure) public goods provision problem with voluntary participation in a quasi-linear economy. We propose a new hybrid solution concept, the free-riding-proof core (FRP-Core), which endogenously determines a contribution group, public goods provision level, and how to share the provision costs. The FRP-Core is always nonempty in public goods economies but does not usually achieve global efficiency. The FRP-Core has support from both cooperative and noncooperative games. In particular, it is equivalent to the set of perfectly coalition-proof Nash equilibria (Bernheim, Peleg, and Whinston, 1987) of a dynamic game with players' participation decisions followed by a common agency game of public goods provision.