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International Tax and Public Finance

, Volume 23, Issue 2, pp 218–233 | Cite as

A public good model with lotteries in large groups

  • Antonio Cabrales
  • Haydée Lugo
Article

Abstract

We analyze the effect of a large group on a public goods model with lotteries. We show that as populations get large, and with preferences in which people only care about their private consumptions and the total supply of the public good, the level of contributions converges to the one given by voluntary contributions. With altruistic preferences of the warm-glow type, the contributions converge to a level strictly higher than those given by voluntary contributions, but in general they do not yield first-best levels. Our results are important to clarify why in general governments do not rely on lotteries for a large part of the revenue creation for public good provision. They are also useful to understand why lottery proceeds are earmarked to worthy causes, where warm glow is likely to be larger.

Keywords

Lotteries Public good Warm glow Efficiency 

JEL Classification

D64 H21 H41 

Notes

Acknowledgments

Cabrales acknowledges the support from the Spanish Ministry of Science and Technology under Grant ECO2012-34581. Lugo acknowledges financial support from the Spanish Ministry of Science and Innovation under Grant ECO2013-42710-P.

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.University College London and CEPRLondonUK
  2. 2.Department of Quantitative Economics (FAE II)Universidad Complutense de MadridMadridSpain

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