This paper shows that the public provision of private goods may be justified on pure efficiency grounds in an environment where individuals have relative consumption concerns. By providing private goods, governments directly intervene in the consumption structure, and thereby have an instrument...

Using a new experimental design, we compare how subjects form beliefs in an investor-client setup under varying degrees of liability. Our results reflect the importance of social preferences when making investment decisions for others. We show that when investors have no liability, those with...