Contributions and crowd -out of public goods: Competing theories and experimental evidence

This research is comprised of four essays studying the voluntary contribution mechanism of providing public goods. The pure altruist model of public good provision predicts an inefficient allocation of resources due to free-riding behavior. Since the public good is provided at less than the efficient quantity, government intervention correcting the market failure is justified.;Various models have been proposed as alternates to the pure altruist model. These models predict less free-riding in public good environments than does the pure altruist model. This dissertation examines three competing models in a common environment in which these models make divergent predictions.;The first essay develops the general theoretical framework of public good games in terms of the pure altruist model. Each player has a dominant strategy to contribute a portion of her endowment to the provision of the public good. In an attempt to increase its supply, the government collects lump-sum taxes and the revenue is spent on the provision of the public good.;Essay two develops the competing models in the environment described above. The model of Warm-Glow giving assumes the individual's contribution generates a private benefit to the contributor. The contribution is now modeled as having a private good component. Contributions in the Inequality Aversion model are a mechanism to reduce income inequality. The Decision Error model suggests players choose with error, but costly errors are less likely to occur. The models of Warm-Glow giving and Inequality Aversion predict contributions will be greater than that of the pure altruist model, whereas the model of Decision Error predicts contributions will be less than the pure altruist model. The Inequality Aversion Model predicts the government policy will be offset by reduced voluntary contributions, while the Warm-Glow giving and Decision Error models predict this policy will only be partially offset.;The third essay reports the design of the experiment, and the fourth states the results. Voluntary contributions do not completely offset the government's tax and spend policy. These findings are consistent with the model of Warm-Glow giving.