Free Riding in Networks
Theoretical Economics
2023-01-16 v1
Abstract
Players allocate their budget to links, a local public good and a private good. A player links to free ride on others' public good provision. We derive sufficient conditions for the existence of a Nash equilibrium. In equilibrium, large contributors link to each other, while others link to them. Poorer players can be larger contributors if linking costs are sufficiently high. In large societies, free riding reduces inequality only in networks in which it is initially low; otherwise, richer players benefit more, as they can afford more links. Finally, we study the policy implications, deriving income redistribution that increases welfare and personalized prices that implement the efficient solution.
Cite
@article{arxiv.2110.11651,
title = {Free Riding in Networks},
author = {Markus Kinateder and Luca Paolo Merlino},
journal= {arXiv preprint arXiv:2110.11651},
year = {2023}
}