Contribution to a public good with altruistic preferences
Anwesha Banerjee  1@  
1 : Max Planck Society  -  Website
Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V.Hofgartenstraße 8D-80539 München -  Germany

This paper presents a model of private provision of a public good where individu-
als in a group have altruistic preferences and care about the private and public good
consumption of the other members of the group. I show that increasing the level
of altruism increases the Nash level of the public good, demonstrating that caring
about others improves public good provision. I then compare the Nash level of the
public good to the benchmark level of provision by a social planner who aggregates
the preferences of the group. I find that if there are non-contributors to the public
good in a Nash equilibrium, income inequality can cause over-provision of the public
good as compared to the planner's benchmark. Over-provision can occur because
the poorest in the society do not contribute and the richer individuals contribute to
the public good as a way to improve the welfare of the poor. These results indicate
that public goods cannot substitute the role of income transfers to the poor even
when individuals are altruistic if the distribution of incomes is highly unequal.


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