Bergstrom, Blume, and Varian: Voluntary contributions and neutrality

Marta Faias,Emma Moreno‐García,Gareth D Myles

doi:10.1111/jpet.12408

Abstract

AbstractBergstrom, Blume, and Varian provided a neutrality result for the private provision of public goods that has inspired a considerable literature. The result has significant implications for income redistribution and broader policy interventions. This paper reviews the basic result and its applications, and discusses extensions to general private provision economies.

Highlights

A surprising result in the analysis of private contributions to a public good is that the total level of provision is unaffected by any reallocation of income among consumers that leaves the set of contributors unchanged
Since the publication of BBV, the analysis has been extended to models with multiple private and public goods with the aim of identifying those redistributions of endowment, within a variety of situations, that leave the private provision equilibrium unchanged
The focus of this paper is upon the implications of the BBV neutrality result and its extensions, we should note, before proceeding, that the publication of BBV inspired a much broader literature on private provision

Summary

| INTRODUCTION

A surprising result in the analysis of private contributions to a public good is that the total level of provision is unaffected by any reallocation of income among consumers that leaves the set of contributors (those giving some positive amount) unchanged This neutrality result was first established by Warr (1983) and extended by Bergstrom, Blume, and Varian (1986), BBV. In contrast to a personalized pricing scheme, BBV analyzed a game‐theoretic model in which the strategy of each player was their voluntary contribution to the provision of a public good For this noncooperative model of public good provision, the proof of existence of a Nash equilibrium was reinforced by the description of sufficient conditions to obtain uniqueness (see Bergstrom, Blume, & Varian, 1992; Fraser, 1992) confirming that there was no way to escape from the neutrality through appeal to multiple equilibria.

Define the

Observe that no resources are lost by redistribution since

Among contributors to all public goods