Social Pressure in Networks Induces Public Good Provision

Why people participate in public good provision is one of the oldest questions in Economics. In the absence of enforcement mechanisms public goods would be under-provided. I develop a dynamic model of forward-looking agents in the presence of social pressure, which provides a potential enforcement mechanism. I show that social pressure is effective in generating provision in a public good game: after an agent starts contributing to the public good, other agents decide to contribute as well because of fear of being punished, what generates contagion in the network. In contrast to the previous literature, contagion happens fast, as part of the best response of fully rational individuals. The network topology has implications for whether the contagion starts and the extent to which it spreads. I find conditions under which an agent decides to be the first to contribute in order to generate contagion in the network, as well as conditions for contribution due to a self-fulfilling fear of social pressure