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


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.


Lotteries Public good Warm glow Efficiency 

JEL Classification

D64 H21 H41 



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.


  1. Andreoni, J. (1990). Impure altruism and donations to public goods: A theory of warm-glow giving? Economic Journal, 100(4), 464–477.CrossRefGoogle Scholar
  2. Bergstrom, T., Blume, L., & Varian, H. (1986). On the private provision of public goods. Journal of Public Economics, 29, 25–49.CrossRefGoogle Scholar
  3. Bergstrom, T., & Cornes, R. (1983). Independence of allocative efficiency from distribution in the theory of public goods. Econometrica, 51(6), 1753–1765.CrossRefGoogle Scholar
  4. Borg, M. O., & Mason, P. M. (1988). The budgetary incidence of a lottery to support education. National Tax Journal, 61, 75–85.Google Scholar
  5. Borg, M. O., Mason, P. M., & Shapiro, S. L. (1991). The economic consequences of state lotteries. New York, NY: Praeger Press.Google Scholar
  6. Buchanan, J. (1963). The economics of earmarked taxes. Journal of Political Economy, 71, 457–469.CrossRefGoogle Scholar
  7. Clotfelter, C. T., & Cook, P. P. (1989). Selling hope, state lotteries in America. Cambridge, MA: Harvard University Press.Google Scholar
  8. Corazzini, L., Faravelli, M., & Stanca, L. (2010). A prize to give for: An experiment on public good funding mechanism. Economic Journal, 120, 944–967.CrossRefGoogle Scholar
  9. Cornes, R., & Sandler, T. (1984). Easy riders, joint production and public goods. Economic Journal, 94, 580–598.CrossRefGoogle Scholar
  10. Cornes, R., & Sandler, T. (1986). The theory of externalities, public goods and club goods (1st ed.). Cambridge: Cambridge University Press.Google Scholar
  11. Duffy, J., & Matros, A. (2012). All-pay actions vs. lotteries as provisional fixed-prize fundraising mechanisms: theory and evidence, discussion paper.Google Scholar
  12. Duncan, B. (2002). Pumpkin pies and public goods: The raffle fundraising strategy. Public Choice, 111, 49–71.CrossRefGoogle Scholar
  13. Giebe, T., & Schweinzer, P. (2014). Consuming your way to efficiency. European Journal of Political Economy, 36, 1–12.CrossRefGoogle Scholar
  14. Landry, C. E., & Price, M. K. (2007). Earmarking lottery proceeds for public goods: Empirical evidence from US lotto expenditures. Economics Letters, 95(3), 451–455.CrossRefGoogle Scholar
  15. Morgan, J. (2000). Financing public goods by means of lotteries. The Review of Economic Studies, 67(4), 761–784.CrossRefGoogle Scholar
  16. Morgan, J., & Sefton, M. (2000). Funding public goods with lotteries: Experimental evidence. The Review of Economic Studies, 67(4), 785–810.CrossRefGoogle Scholar
  17. Olszewski, W., & Siegel, R. (2013). Large contests. Discussion paper, Mimeo.Google Scholar
  18. Orzen, H. (2008). Fundraising through competition: Evidence from the lab, CeDEx discussion paper series 2008–11, Nottingham.Google Scholar
  19. Schram, A., & Onderstal, S. (2009). Bidding to give: An experimental comparison of actions for charity. International Economic Review, 50(2), 431–457.CrossRefGoogle Scholar
  20. Steinberg, R. (1987). Voluntary donations and public expenditures in a federalist system. American Economic Review, 77, 24–36.Google Scholar
  21. Temimi, A. (2001). Does altruism mitigate free-riding and welfare loss? Economics Bulletin, 8(5), 1–8.Google Scholar

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

Personalised recommendations