ABSTRACT
Many public projects provide both collective and private benefits. In these instances, α lies between the extremes of zero and one. From the two polar cases, we would expect the risk premium, and thus the social cost of risk, to be lower for projects providing relatively more private consumption benefits. However, we find that this intuitive prediction is not
universally valid. Nonetheless, the social value of the project increases as α increases, ceteris paribus. We first investigate the effect of rivalry on the risk premium.
