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Present-Biased Preferences and Publicly Provided Private Goods
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Umeå University, Faculty of Social Sciences, Department of Economics.
2014 (English)In: Finanzarchiv, ISSN 0015-2218, E-ISSN 1614-0974, Vol. 70, no 2, 169-199 p.Article in journal (Refereed) Published
Abstract [en]

This paper analyzes the welfare effects of a publicly provided private good with long-term consequences for individual well-being, in an economy where consumers have present-biased preferences due to quasihyperbolic discounting. The analysis is based on a two-type model with asymmetric information between the government and the private sector, and each consumer fives for three periods. We present formal conditions under which public provision to the young and the middle-aged generation, respectively, leads to higher welfare. Our results show that quasihyperbolic discounting provides a strong incentive for public provision to the young generation - especially if the consumers are naive (as opposed to sophisticated).

Place, publisher, year, edition, pages
2014. Vol. 70, no 2, 169-199 p.
Keyword [en]
public provision of private goods, health care, hyperbolic discounting, intertemporal model, asymmetric information
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Research subject
URN: urn:nbn:se:umu:diva-91384DOI: 10.1628/001522114X681333ISI: 000338091700001OAI: diva2:736532
Riksbankens Jubileumsfond, RS10-1319:1
Available from: 2014-08-07 Created: 2014-08-04 Last updated: 2014-12-18Bibliographically approved

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Aronsson, ThomasGranlund, David
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