A Case for Bundling Public Goods Contributions?

Suman Ghosh (), Alexander Karaivanov and Mandar Oak ()

No 5005, Working Papers from Department of Economics, College of Business, Florida Atlantic University

Abstract: We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated towards the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis-a-vis a separate contributions scheme. We show that when agents have homogeneous preferences, they cannot be made better off with a bundling scheme. On the contrary, in the generic case when agents are heterogenous in their incomes and preferences, bundling may increase joint welfare compared to a separate contribution scheme, in particular for higher income inequality among the agents. It is interesting to note that the welfare improvement occurs despite a decrease in total contributions. Our findings have implications for the design of charitable institutions and international aid agencies.

Keywords: Private provision; Public goods; Bundling (search for similar items in EconPapers)
JEL-codes: D61 H41 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-06
New Economics Papers: this item is included in nep-mic and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: A Case for Bundling Public Goods Contributions (2007)
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