Localized prosocial preferences, public goods, and common-pool resources

Area of Science:

• Social Science
• Behavioral Economics
• Game Theory

Background:

• Prosocial preferences are believed to ease collective action problems like public goods provision.
• However, prosociality is often restricted to in-groups, potentially limiting societal benefits.

Purpose of the Study:

• To develop a theoretical model of localized prosociality within subgroups.
• To analyze the impact of in-group biased preferences on societal economic outcomes.
• To quantify how localized prosociality bridges the welfare gap between Nash equilibrium and social optimum.

Main Methods:

• Developed a general theoretical model of a society divided into subgroups.
• Incorporated varying degrees of care for in-group versus out-group welfare.
• Analyzed special cases to examine economic consequences of localized prosociality.

Main Results:

• Individual contributions to public goods have differential spillover effects across groups.
• The extent to which welfare gaps close depends on the substitutability of private and public inputs.
• For poor substitutes, welfare gap closure is a concave function of prosociality, with low levels yielding near-optimal social welfare.

Conclusions:

• Localized prosociality can substantially improve societal welfare, even when not universally applied.
• The effectiveness of prosociality in closing welfare gaps is contingent on input substitutability.
• Even limited, in-group focused prosociality can be highly effective in achieving near-social optimum outcomes.