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Cursed Beliefs with Common-Value Public Goods

Cox, C.

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Authors

C. Cox



Abstract

I show how improper conditioning of beliefs can reduce contribution in public goods environments with interdependent values. I consider a simple model of a binary, excludable public good. In equilibrium, provision of the public good is good news about its value. Naïve players who condition expectations only on their private information contribute too little, despite the absence of free-riding incentives. In a laboratory experiment, contributions indeed fall short of the equilibrium prediction. Using modified games with different belief-conditioning effects, I verify that subjects fail to condition beliefs properly. However, improper belief conditioning cannot fully explain the results.

Citation

Cox, C. (2015). Cursed Beliefs with Common-Value Public Goods. Journal of Public Economics, 121, 52-65. https://doi.org/10.1016/j.jpubeco.2014.11.006

Journal Article Type Article
Publication Date Jan 1, 2015
Deposit Date Nov 19, 2014
Publicly Available Date Nov 19, 2014
Journal Journal of Public Economics
Print ISSN 0047-2727
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 121
Pages 52-65
DOI https://doi.org/10.1016/j.jpubeco.2014.11.006
Keywords Public goods, Experiments, Cursed equilibrium, Game theory.
Public URL https://durham-repository.worktribe.com/output/1417386

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Accepted Journal Article (626 Kb)
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Copyright Statement
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Public Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Public Economics, 121, January 2015, 10.1016/j.jpubeco.2014.11.006.




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