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An impure public good model of local food systems: Aggregative games of four locals

by Yuji Saikai, a PhD candidate at University of Wisconsin-Madison

Abstract
This article builds a theoretical model of local food systems characterized by a public good. Local food has been flourishing across the world and attracting attention of the general public, policy makers and a wide range of academics. Most of them recognize some forms of social benefits created through local food systems. However, there exists no economic research that explicitly models the mechanism of social benefit creation. We address the issue by adopting an impure public good hypothesis as a basic framework for relating local food consumption to social benefits. In addition, to reflect its participatory nature, we use a non-linear aggregator, as opposed to the standard linear aggregator, of each contribution to the public good. These two distinguishing features necessarily lead to four types of consumers. We explain how local food systems involve economic games, prove the existence of a unique Nash equilibrium, and provide comparative statics of both the public good and the private goods. The article closes by numerically illustrating how the model works.

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