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Social Choice and Welfare

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12-04-2021 | Original Paper

Identity in public goods contribution

Authors: Fuhai Hong, Larry Karp, Tat-How Teh

Published in: Social Choice and Welfare | Issue 3/2021

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Abstract

Agents’ decision whether to join a group, and their subsequent contribution to a public good, depend on the group’s ideals. Agents have different preference for this public good, e.g. reductions in greenhouse gas emissions. People who become “climate insiders” obtain identity utility, but suffer disutility if they deviate from the group ideal. That ideal might create a wide but shallow group, having many members but little effect on behavior, or a narrow but deep group. Greater heterogeneity of preferences causes the contribution-maximizing ideal to create narrow but deep groups. The contribution-maximizing ideal maximizes welfare if the population is large.

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Kotchen and Moore (2008) find that environmentalists are more likely to voluntarily restrain their consumption of goods and services that generate negative externalities. Kahn (2007) finds that those who vote for green policies and register for liberal/environmental political parties live a greener lifestyle, commuting by public transit more often, favoring hybrid vehicles, and consuming less gasoline than non-environmentalists.

For example, authors Peter Nearing and Janet Luhrs advocate sustainable living through vivid illustrations of simple lifestyles; in 2007, the United Nations published “Sustainable Consumption and Production, Promoting Climate-Friendly Household Consumption Patterns,” to promote sustainable lifestyles in communities and homes; Nobel Laureate Al Gore further propelled the green lifestyle movement through his movie “An Inconvenient Truth”.

Examples include Akerlof and Kranton (2005, 2008, 2010)), Benjamin et al. (2010), Benjamin et al. (2016) and Hiller and Verdier (2014). These studies extend Akerlof and Kranton’s (2000) framework to analyze behavior in workplaces, schools, churches, and families.

Similarly, Iannaccone (1992) study sacrifice and seemingly inefficient prohibitions as a screening device where individuals sort themselves into different religions. Carvalho (2016) models an identity-based religious organization that sets religious strictness to maximize participation in its activities. In an industrial organization context, Kosfeld and von Siemens (2011) consider how workers with different willingness to cooperate self select into firms having different monetary incentives and level of worker cooperation, leading to heterogeneous corporate cultures.

In a related paper by Shayo (2009), identity utility is also derived from social status while identity cost comes from social distance from other group members rather than an ideal. Shayo (2009) studies the formation of national identities and preferences for redistribution. Costa-i-Font and Cowell (2014) review the related literature on social identity and redistribution.

In our model, V can also be viewed as the difference in identity utility between insiders and outsiders, if the outsiders also enjoy certain identity utility.

The literature on identity and economics addresses the determination of group stereotypes or prescriptions (“ideals” in our model) in varied ways. Benjamin et al. (2010; 2016) treat group prescriptions as exogenous and given. In Shayo (2009) and Bernard et al. (2016), the group stereotype is determined by the average type or behavior of the group members. In Akerlof (2017), individuals choose their own values. Akerlof and Kranton (2002) discusses the choice of a group ideal in a school setting. In this approach, an ideal setter (the school) interacts with a continuum of agents (students) who decide whether to identify with the ideal. We follow this approach in the context of public goods contribution.

For example, Aidt (1998) and Conconi (2003) assume that environmentalists organize a green lobby group that only cares about the environment. List and Sturm’s (2006) model also assumes that environmentalists’ payoff depends only on which environmental policy is undertaken.

This is an agent behind the veil of ignorance under stage 0 and the social leader has not learnt the agent’s type yet. With a fixed group size N, maximizing a representative agent’s welfare is equivalent to maximizing the total welfare.

By Eq. (4) and Lemma 2, the largest increase in contribution implemented by an ideal \(a^{*}\) is \(\frac{\theta }{1+\theta }\left[ a^{*}-\left( a^{*}-B\right) \right] =\) \(\frac{\theta B}{1+\theta }\equiv \left( \frac{2V\theta }{1+\theta }\right) ^{1/2}\).

See Bagnoli and Bergstrom (2005) for more examples and applications.

By Lemma 2, any ideal \(a^{*}>\overline{\beta }+B\) does not attract any insider.

In Appendix A.3.2, we consider non-monotonic f, and characterize the contribution-maximizing ideal when \(\gamma \) converges to 0.

Suppose \(f^{\prime }\le 0\) for all \(\beta _{i}\), then \(f\left( \underline{\beta }\right) \ge \frac{1}{\bar{\beta }-\underline{\beta }}\), implying \(\frac{1}{f\left( \underline{\beta }\right) }\le \bar{\beta }-\underline{\beta }\le B\) under small preference heterogeneity. By Proposition 3, \(\bar{a}=\underline{\beta }+B\).

In this subsection, we focus on the standard welfare measure \(M\left( a^{*}\right) \).

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Title: Identity in public goods contribution
Authors: Fuhai Hong
Larry Karp
Tat-How Teh
Publication date: 12-04-2021
Publisher: Springer Berlin Heidelberg
Published in: Social Choice and Welfare / Issue 3/2021
Print ISSN: 0176-1714
Electronic ISSN: 1432-217X
DOI: https://doi.org/10.1007/s00355-021-01322-1

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