Lotteries, Group Size and Public Good Provision
University of Alabama Economics, Finance & Legal Studies Working Paper No. 05-04-01
21 Pages Posted: 9 Apr 2005
Date Written: April 2005
Morgan (2000) has shown that lotteries are potentially an effective mechanism for the provision of public goods. In particular, he has shown that lotteries lead to a level of provision above the level provided by the voluntary contributions mechanism. In this paper, we analyze the effect of group size on public good provision under the lottery mechanism. We consider the lottery model with identical consumers and then compute comparative statics with respect to group size. For a pure public good, the lottery performs quite well as public good provision is found to increase in group size, even when the lottery prize is held constant. By contrast, for fully rival public goods, per capita provision is found to decrease in group size, even when the lottery prize is proportional to group size. Further, the per capita level of provision will approach 0 when group size is sufficiently large.
Keywords: Collective Action, Public Goods, Group Size, Lotteries
JEL Classification: D7, H4, C72
Suggested Citation: Suggested Citation