Learning, public good provision, and the information trap

We consider an economy where decision maker(s) do not know the true production function for a public good. By using Bayes rule they can learn from experience. We show that the economy 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 experimentation.

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Year of publication:	2008-05
Authors:	Berentsen, Aleksander ; Bruegger, Esther ; Loertscher, Simon
Institutions:	Institut für Volkswirtschaftslehre, Wirtschaftswissenschaftliche Fakutät
Subject:	Public economics \| learning \| size of government

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Extent:	application/pdf
Series:	IEW - Working Papers. - ISSN 1424-0459.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series IEW-working papers Number 371
Classification:	D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legistures, and Voting Behavior ; H10 - Structure and Scope of Government. General ; D83 - Search, Learning, Information and Knowledge
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005585619