1
$\begingroup$

I am looking for examples of public goods that are such that the marginal contribution of an individual increases their provision by an amount that is close to zero.

For instance, climate change is one of them (although here one could speak of public bad): my individual contribution is unlikely to affect the climate.

Are there any other examples of such public goods?

$\endgroup$

1 Answer 1

3
$\begingroup$

Two examples that I can think are:

$\Rightarrow$ A person in Delhi contributing money for the construction of a well in Nairobi

$\Rightarrow$ A person spending time at a teaching programme for underprivileged kids (instead of money the budget line can be thought of in terms of time.)

In both these cases (and yours) the marginal gains are 0 for the agent in terms of the tangible goods but the fact that a rational agent will make these payments means that there is an intangible aspect of humanitarianism in the utility functions, say, $U(x,y,z) = (xy)^2 \sqrt{z}$ , where $x$ is the consumption of food, $y$ is the consumption of other goods than food and z is the amount contributed for a cause. So the consumer will solve:

$\underset{x,y,z}{Max}(xy)^2 \sqrt{z} $ subject to $ P_x (x) + y + z \leq M$

This explains why people make these contributions even after 0 tangible gains from them.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.