Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198801 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7441
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper investigates how the heterogenous incomes and preferences of potential donors affect the timing of contribution decisions when it is endogenously determined by contributors themselves. More specifically, we use a simple setting with two donors, Cobb-Douglas preferences, and complete information to investigate how income inequality affects the endogenous choices of contribution timing and the level of the voluntary supplied public goods. This paper obtains the following results. First, when income is extremely unequal, potential contributors are indifferent between the timing choices of simultaneous and sequential moves, even if they have different preferences towards a public good. Second, as income inequality decreases, the simultaneous move-game is increasingly likely to emerge, because all potential contributors prefer to act as a leader. Third, in the presence of multiple public goods, contributors with higher valuations for one public good tend to be first contributors to that one. Fourth, these theoretical predictions regarding the timing decisions of individuals are not supported by the laboratory experiment, although those regarding individuals’ contribution decisions are consistent with the experimental results.
Subjects: 
Nash equilibrium
Stackelberg equilibrium
public good
endogenous timing
voluntary provision
income distribution
JEL: 
D31
H41
H42
Document Type: 
Working Paper
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