Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 38: Public Goods and Optimal Paternalism under Present-Biased Preferences

Thomas Aronsson and David Granlund ()
Additional contact information
Thomas Aronsson: Umeå University, Postal: Department of Economics, SE-901 87 Umeå, Sweden
David Granlund: The Swedish Retail Institute (HUI), Postal: Regeringsgatan 60, 103 29 Stockholm, Sweden, and Department of Economics, Umeå University, SE-901 87 Umeå, Sweden

Abstract: This paper deals with the optimal provision of a state-variable public good in a two-type model, when the consumers have present-biased preferences due to quasi-hyperbolic discounting. The results show that the preference for immediate gratification facing the (mimicking) high-ability type weakens the incentive to adjust the public provision in response to the self-selection constraint.

Keywords: Public Goods; Quasi-Hyperbolic Discounting; Redistribution; Asymmetric Information

JEL-codes: D03; D61; H41

7 pages, June 1, 2010

Note: Public Goods; Quasi-Hyperbolic Discounting; Redistribution; Asymmetric Information

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