Page 1 of 13

111

Archives of Business Review – Vol. 8, No.7

Publication Date: July 25, 2020

DOI: 10.14738/abr.87.8448.

Zweifel, P., & Xu, X. (2020). Private Production Of A Public Good In The Information Age. Archives of Business Research, 8(7). 111-123.

Private Production of A Public Good in The Information Age

Peter Zweifel

Professor, Dept. of Economics,

University of Zurich

Xian XU

Fudan University

ABSTRACT

The objective of this contribution is to model the behaviour of IT

specialists who en-gage in open source activity while on the job thus

privately provide a public good. Both the regular and the social types

are assumed to be interested in income and lei-sure; however, for the

social types effective leisure is enhanced by the number of ex-ternal

users, which enhances their intrinsic motivation because the ‘good

deed’ can be made known to millions worldwide. The core finding is

that contrary to the regular ones, social type may defy the threat of the

employer (higher probability of detection, size of the sanction if

detected) by en-gaging in more rather than less open source work,

provided the number of external user is high enough. This finding

suggests that the information age may facilitate the private production

of a public good. The originality of this contribution lies in the

prediction that certain type of workers may act against contractual

incentives – a rare event in economics.

Keywords: production of information; public goods; sanction; type.

INTRODUCTION

The possibility of private provision of a public good has intrigued economists ever since Bergstrom

et al. (1986). However, their prediction that this phenomenon is crowded out due to the absence

of economic (‘extrinsic’) incentives has received limited empirical support, causing Andreoni

(1990) to formulate an extension in the guise of ‘warm glow’ theory. In contrast, many

psychologists adhere to self-determination theory which emphasizes the importance and stability

of intrinsic motivation, particularly in education (Ryan and Deci, 2000). Modelling a game between

an employer and an employee, Bénabou and Tirole (2003) elucidate the interplay between

extrinsic and intrinsic motivation. However, they do not explicitly link intrinsic motivation to the

production of public goods, which moreover often than not occurs at the workplace. Workers who

contribute to the productivity of their team and the profitability of the firm usually do not reap the

full benefit of their efforts. To some extent, they therefore create a club good, i.e., a local public

good. However, in the information age, the benefits of their activity may spill over beyond their

own firm, becoming a global public good. Since the employer in fact pays for this activity as long as

it is not detected, two issues arise that have rarely been addressed.