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A public good model with lotteries in large groups

Cabrales, A; Lugo, H; (2015) A public good model with lotteries in large groups. International Tax and Public Finance , 23 (2) pp. 218-233. 10.1007/s10797-015-9359-y. Green open access

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Abstract

We analyze the effect of a large group on a public goods model with lotteries. We show that as populations get large, and with preferences in which people only care about their private consumptions and the total supply of the public good, the level of contributions converges to the one given by voluntary contributions. With altruistic preferences of the warm-glow type, the contributions converge to a level strictly higher than those given by voluntary contributions, but in general they do not yield first-best levels. Our results are important to clarify why in general governments do not rely on lotteries for a large part of the revenue creation for public good provision. They are also useful to understand why lottery proceeds are earmarked to worthy causes, where warm glow is likely to be larger.

Type: Article
Title: A public good model with lotteries in large groups
Open access status: An open access version is available from UCL Discovery
DOI: 10.1007/s10797-015-9359-y
Publisher version: http://dx.doi.org/ 10.1007/s10797-015-9359-y
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Lotteries, Public good, Warm glow, Efficiency
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1505778
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