Consistent conjectures and voluntary contributions to public goods: why the conventional theory does not work |
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Authors: | Robert Sugden |
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Institution: | School of Economic and Social Studies, University of East Anglia, Norwich NR4 7TJ, UK |
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Abstract: | The conventional theory of voluntary contributions to public goods assumes that each person maximises his utility taking other people's behaviour as given (Nash conjectures). It is now coming to be recognised that this theory is inconsistent with observed behaviour. This paper argues that the problems of the theory are compounded — and not, as some economists have argued, resolved — by relaxing the assumption of Nash conjectures. If individuals' conjectures are consistent, each person will hold the (correct) belief that other people's contributions are inversely related to his own. Under most reasonable assumptions, equilibrium is a state in which no-one contributes anything. |
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