DP8607 | Private Provision of Public Goods and Information Diffusion in Social Groups

Author(s)

Publication Date

01/10/2011

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

We describe a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity. Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbors and non-neighbors. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals? social neighborhoods.