Contribution to a public good under subjective uncertainty

Abstract

This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two-state-dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first-and second-order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision, as does any homogenization of these beliefs around their mean."The debate's over. The people who dispute the international consensus on global warming are in the same category now with the people who think the moon landing was staged on a movie lot in Arizona." (Al Gore) "Whether global warming or climate change. The fact is we didn't cause it. We cannot change it." (Donald J. Trump) (A5)

Climate Policy, Irreversibilities and Global Economic Shocks

“…in order to highlight how, under income uncertainty, di¤erent possible technological frictions on countries a¤ect the risk-allocation in the voluntary provision game. 8 Uncertainty is about the state of the world. There are S states of the world, indexed by s 2 f1; :::; Sg = S. Probabilities p s are assigned to the states.…”