Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 811: Public Goods and Optimal Paternalism under Present-Biased Preferences

Thomas Aronsson () and David Granlund ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
David Granlund: Department of Economics, Umeå University, Postal: S 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 21, 2010

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