Groupe d’études et de recherche en analyse des décisions

Dynamics of Provision of Threshold Public Goods

Arnaud Z. Dragicevic CIRANO, Canada

Agents face an ambiguous risk of biodiversity survival as well as ambiguous expected losses from its extinction. Indeed, as a collectivity, agents are faced with the option of privately funding the protection of biodiversity for biomedical research. We propose two evolutionary models of threshold public goods game and public goods option market, where we consider population dynamics with proportional fair-share contributors versus free-riders. In the first model, we find that agents contribute both in null and ambiguous survival scenarios. In the second model, in case of ambiguous survival, the public good is provided when the agents exchanging option contracts are equally divided into buyers and sellers. This result holds for a specific market belief over the species’ survival. However, the absence of surplus captured on the option market condemns its raison d’être. Low risk will provoke unconditional social free-riding in both models.