Private provision of public goods and information diffusion in social groups

09 August 2011 | There is evidence that social interactions matter for charitable giving. This paper describes a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity.

Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbors and non-neighbors. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals' social neighborhoods.