Experimental Analysis of Risk and Uncertainty in Provisioning Private and Public Goods

Economic Inquiry, Vol. 47, No. 1, pp. 146-164, January 2009

19 Pages Posted: 26 Jan 2009

See all articles by Lata Gangadharan

Lata Gangadharan

University of Melbourne - Department of Economics

Veronika Nemes

Government of Victoria - Department of Sustainability and Environment

Abstract

This paper uses laboratory evidence from public goods games to examine how in payoff-equivalent situations, decision makers contribute toward private or public goods when they are exposed to different kinds of risks and uncertainties in the provision of these goods. We find that location matters with subjects moving away from the environmental uncertainty in favor of strategic uncertainty when that uncertainty is located on the private good. When the uncertainty relates to the public good, subjects face both kinds of uncertainties on the same good, leading to a significant drop in contributions. An opportunity to reduce uncertainty increases cooperation.

JEL Classification: C90, D81, H41

Suggested Citation

Gangadharan, Lata and Nemes, Veronika, Experimental Analysis of Risk and Uncertainty in Provisioning Private and Public Goods. Economic Inquiry, Vol. 47, No. 1, pp. 146-164, January 2009, Available at SSRN: https://ssrn.com/abstract=1331686 or http://dx.doi.org/10.1111/j.1465-7295.2007.00118.x

Lata Gangadharan (Contact Author)

University of Melbourne - Department of Economics ( email )

Victoria, 3010
Australia
+61 3 9344 5408 (Phone)
61 3 8344 6899 (Fax)

Veronika Nemes

Government of Victoria - Department of Sustainability and Environment ( email )

8 Nicholson Street
East Melbourne, VIC
Australia

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