Positional and conformist effects in public good provision. Strategic interaction and inertia

Description

Social context gives rise, in some individuals, to a desire to conform with other people. Conversely, other people desire to be exclusive or different from the "common herd". We study the interaction between two different agents: the positional player, characterized by the snob effect, and the conformist player, characterized by the bandwagon effect. Both agents engage in a public good game. For a static game we prove that some contribution is feasible only if the status concern of the positional player is sufficiently large. Moreover, contribution by both players requires also that the conformist player sees private contributions as complements. We also analyze how status concerns influence social welfare. In the second part of the paper, we extent the game to a dynamic setting, considering individuals who are change-adverse and who compare their current action against the opponent's past action. Convergence to the static Nash equilibrium can be monotone, oscillating, or spiral. Numerical simulations show that some properties of contributions and utilities along the transition path can be different than those in the long run; specifically, non-monotone convergence can induce overshooting in contributions allowing for over/undershooting in welfare.

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