Pareto Improvement through Unilateral Matching of Public Good Contributions: The Role of Commitment
9 Pages Posted: 9 Jul 2014
Date Written: June 25, 2014
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: Suggested Citation