Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2023-09-20
Number: 23-057/VIII
Author-Name: Erik Ansink
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Hans-Peter Weikard
Author-Workplace-Name: Wageningen University
Title: Agreeing on public goods or bads
Abstract: Without regulation or agreement, public goods are underprovided and public bads are overprovided. Both problems are usually seen as flip sides of the same coin. In this paper we examine a situation where a public good is good for some agents but bad for others, and this preference is endogenous to the provisioning level of the good. We allow agents to form a coalition to coordinate provision. Compared with games with only goods (or only bads) we find larger coalitions in equilibrium. Specifically, we analyze a game with quadratic benefit- and cost functions and we find the grand coalition to be stable except for situations where agents have identical or almost identical characteristics. The main driving force of coalition stability is that cooperation avoids a wasteful contest between agents pulling the provision level in opposite directions. We show that, in equilibrium, wasteful contest is confined to a narrow range of the parameter space of our game. This result connects the literatures on public goods and contests.
Classification-JEL: C72; D02; Q20
Keywords: Public goods or bads; Cartel games; Coalition stability; Contests; Geo-engineering 
ExperimentFile-URL: https://papers.tinbergen.nl/23057.pdf
File-Format: application/pdf
File-Size: 326.033  bytes
Handle: RePEc:tin:wpaper:20230057