Dynamic voluntary contribution under time-inconsistency

Abstract

I study the voluntary public good provision model and introduce time inconsistent agents who have {u100000} preferences. There is a public project and finitely many agents where each agent is allowed to contribute any amount in any period before the project is completed. The agents have discontinuous and symmetric preferences over the total contribution with a jump when there is provision. There is complete information about the environment but imperfect information about others’ individual actions: each period, each agent observes only the total contribution made, not the other agents’ individual contributions. Assuming the agents are sophisticated, we characterize the set of equilibria. I compare the set of equilibria under sophisticated time-inconsistent agents to that under time-consistent agents with a discount factor equal to the average discount factor of a time-inconsistent agent. show that there are equilibria with time-inconsistent agents, which are not equilibria with time-consistent agents. We also show that there are some projects, which are completed by the sophisticated time-inconsistent agents earlier than the time-consistent agents complete. iv