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Farsightedness may lead to overprovision in a public goods provision game

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September 30, 2009

The details of research

In economic theory, the provision of public goods is usually modeled as a 'prisoners' dilemma' game. It is well established in the literature that agents always have an incentive not to contribute to the public good, resulting in a so-called Pareto inefficient outcome. On the other hand, Suzuki and Muto (2005) showed that if agents are farsighted then, in general, the only stable outcomes are Pareto efficient—meaning that all goods are well-distributed, and it is impossible to make anyone better-off without making someone else worse-off.

Now, Ryo Kawasaki and Shigeo Muto have investigated a public goods provision game in which the public good is provided only when the number of contributors exceeds the minimum required amount. An example is majority voting, where agents have the option to abstain from voting. They show that if agents are farsighted, almost any outcome with any number of contributors that is at least the required amount can be stable. Thus, farsightedness could lead to overprovision, which is an inefficient outcome.

Although the model considered here is very similar to Suzuki and Muto (2005), Kawasaki and Muto report drastically different results. The implication is that overprovision can result as a stable outcome from very rational agents, which was not shown to be the case in the literature.

R. Kawasaki and S. Mutoouter
Mathematical Social Sciences 58, 98-109 (2009)
Department of Social Engineering A. Suzuki and S. Muto
International Journal of Game Theory 33, 431-445 (2005)
Department of Social Engineering

Reference
Shigeo Muto
Graduate School of Decision Science and Technology Social Engineering
Professor

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