Buchholz, Wolfgang Cornes, Richard Peters, Wolfgang Rübbelke, Dirk
CESifo Working Paper 4863
When providing public goods through voluntary contributions, a donor may introduce unilateral matching in order to reduce underprovision of the public good and thus inefficiency. By itself, however, matching benefits the donor but harms the recipient. We apply Cornes and Hartley's aggregative game approach to provide a novel graphical explanation of this transfer paradox, and also show how it may be avoided by introducing a commitment device.
voluntary public good provision matching commitment