Pareto Improvement through Unilateral Matching of Public Good Contributions: The Role of Commitment

9 Pages Posted: 9 Jul 2014

See all articles by Wolfgang Buchholz

Wolfgang Buchholz

Universitaet Regensburg; CESifo (Center for Economic Studies and Ifo Institute)

Richard C. Cornes

Australian National University (ANU) - Faculty of Economics & Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Wolfgang Peters

European University Frankfurt

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg

Date Written: June 25, 2014

Abstract

When providing public goods through voluntary contributions, a donor may introduce unilateral matching in order to reduce underprovision of the public good and thus inefficiency. By itself, however, matching benefits the donor but harms the recipient. We apply Cornes and Hartley’s aggregative game approach to provide a novel graphical explanation of this transfer paradox, and also show how it may be avoided by introducing a commitment device.

Keywords: voluntary public good provision, matching, commitment

JEL Classification: H23, H41

Suggested Citation

Buchholz, Wolfgang and Cornes, Richard C. and Peters, Wolfgang and Rübbelke, Dirk T. G., Pareto Improvement through Unilateral Matching of Public Good Contributions: The Role of Commitment (June 25, 2014). CESifo Working Paper Series No. 4863. Available at SSRN: https://ssrn.com/abstract=2463602

Wolfgang Buchholz

Universitaet Regensburg ( email )

D-93040 Regensburg, 93053
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Richard C. Cornes

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Wolfgang Peters

European University Frankfurt ( email )

Grosse Scharrnstr. 59
Frankfurt (Oder), Brandenburg 15230
Germany

Dirk T. G. Rübbelke (Contact Author)

Technische Universität Bergakademie Freiberg ( email )

Freiberg, 09599
Germany

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