Discussion Papers no. 257

Endogenous peer groups

Social norms and private provision of public goods

The formation of peer groups with social norms for private contributions to a public good is analyzed in an n-player two stage game. First people choose a peer group, then they choose whether to contribute. The first choice is made through a learning process represented by evolutionary dynamics, while the second choice is made by utility maximization. The game has two types of stable states: One in which very few people belong to peer groups with social norms for private contributions, and one in which a large portion of people belong to such peer groups. ln the former state nobody contributes, while in the latter everybody contributes. Direct governmental contributions to the public good can move the society to a stable state in which nobody contributes, where as governmental subsidization can move the society to a stable state in which everybody contributes. Indeed, the crowding in caused by subsidization can prevail after policy reversal.

Om publikasjonen

Tittel

Social norms and private provision of public goods. Endogenous peer groups

Ansvarlig

Mari Rege

Serie og -nummer

Discussion Papers no. 257

Utgiver

Statistics Norway, Research Department

Emne

Discussion Papers

ISSN

1892-753X

Antall sider

26

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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