The Free Rider Problem: a Dynamic Analysis / Marco Battaglini, Salvatore Nunnari, Thomas Palfrey.

Format:

Book

Author/Creator:

Battaglini, Marco.

Contributor:

National Bureau of Economic Research.

Nunnari, Salvatore.

Palfrey, Thomas.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17926.

NBER working paper series no. w17926

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We present a dynamic model of free riding in which n infinitely lived agents choose between private consumption and contributions to a durable public good g. We characterize the set of continuous Markov equilibria in economies with reversibility, where investments can be positive or negative; and in economies with irreversibility, where investments are non negative and g can only be reduced by depreciation. With reversibility, there is a continuum of equilibrium steady states: the highest equilibrium steady state of g is increasing in n, and the lowest is decreasing. With irreversibility, the set of equilibrium steady states converges to a unique point as depreciation converges to zero: the highest steady state possible with reversibility. In both cases, the highest steady state converges to the efficient steady state as agents become increasingly patient. In economies with reversibility there are always non-monotonic equilibria in which g converges to the steady state with damped oscillations; and there can be equilibria with no stable steady state, but a unique persistent limit cycle.

Notes:

Print version record

March 2012.