Learning, public good provision, and the information trap

We consider an economy with uncertainty about the true production function for a public good. By using Bayes rule the economy can learn from experience. We show that it may learn the truth, but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap. We also show that our results are robust with respect to small experimentation.

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Year of publication:	2008
Authors:	Berentsen, Aleksander ; Bruegger, Esther ; Loertscher, Simon
Published in:	Journal of Public Economics. - Elsevier, ISSN 0047-2727. - Vol. 92.2008, 5-6, p. 998-1010
Publisher:	Elsevier

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005108826