A theoretical analysis of altruism and decision error in public goods games

Abstract

We formalize an equilibrium model in which altruism and decision-error parameters determine the distribution of contributions for linear and quadratic public goods games. The equilibrium density is exponential for linear games, and normal for quadratic games. Our model implies: (i) contributions increase with the marginal value of the public good, (ii) total contributions increase with the number of participants, (iii) mean contributions lie between the Nash prediction and half the endowment. These predictions, which are not implied by a Nash analysis, are consistent with laboratory data. Maximum likelihood estimates of altruism and error parameters are significant and plausible.