Giving with impure warm glow
MetadataShow full item record
Existing literature does not provide an analysis of an economy containing both risk averse and risk neutral individuals who are faced with a lottery that finances a public good. We provide a thorough analysis of individual behavior and strategic interactions between both types of individuals. We find that voluntary giving is crowded out completely, if preferences are separable. As an explanation for voluntary contributions, we introduce the notion of impure warm glow giving. We show that impure warm glow givers contribute more to the public good than without the warm glow. Furthermore, we show that neutrality of public-good provision with respect to the distribution of income does not hold in this setup.