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Private Provision of Public Goods via Crowdfunding

Journal of Institutional Economics, Forthcoming

38 Pages Posted: 7 Feb 2016 Last revised: 24 Mar 2017

Marek Hudik

Xi'an Jiaotong University (XJTU) - International Business School Suzhou

Robert Chovanculiak

Matej Bel University

Date Written: March 23, 2017

Abstract

For various reasons, governments sometimes fail to provide public goods. Private provision of such goods might then be used if it succeeds in overcoming three main problems: high organization costs, the assurance problem, and the free-rider problem. We argue that technologies that enable crowdfunding — the method of funding projects by raising small amounts of money from a large number of people via the internet — have enabled these problems to be overcome more readily. Such technology has lowered organization costs and enabled the employment of more efficient mechanisms to reduce the assurance and free-rider problems. To illustrate these effects, we present two case studies of private provision of public goods via crowdfunding: police services in Rockridge in Oakland, California, and the Ukraine Army.

Keywords: civic crowdfunding, public goods, private provision of public goods, organization costs, assurance problem, free-rider problem

JEL Classification: H41, D70

Suggested Citation

Hudik, Marek and Chovanculiak, Robert, Private Provision of Public Goods via Crowdfunding (March 23, 2017). Journal of Institutional Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2728585 or http://dx.doi.org/10.2139/ssrn.2728585

Marek Hudik (Contact Author)

Xi'an Jiaotong University (XJTU) - International Business School Suzhou ( email )

111 Ren’ai Road,
Suzhou Lake Higher Education Town,
Suzhou, Jiangsu 215123
China

Robert Chovanculiak

Matej Bel University ( email )

Tajovskeho 10
SK 974 01 Banska Bystrica, 97401
United States

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