Identity in Public Good Games

 Assistant Professor, Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University

Prof. Fuhai Hong's CV

This paper incorporates identity into a model of voluntary public good contribution with players of heterogenous preferences. An ideal of contributing to public goods divides players to different social categories: Players who identify with the ideal become insiders, obtaining identity utility but incurring disutility if their contributions depart from the ideal, while players who do not identify with the ideal remain as outsiders. To best resolve the free-riding problem of the public good game, the ideal level being chosen reflects a tradeoff between the depth and width of identity. With uniform distribution of players' preference, we solve for the optimal ideal that maximizes public good contribution, and show that this ideal also maximizes welfare as long as the population is large enough. We then extend our analysis to general distribution functions. Our analyses have implications for social policymaking, especially for policies that aim for greenhouse gas abatement, energy conservation, etc.