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Threshold uncertainty in the private-information subscription game

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  • Barbieri, Stefano
  • Malueg, David A.

Abstract

We introduce threshold uncertainty, à la Nitzan and Romano (1990), into a private-values model of voluntary provision of a discrete public good. Players are allowed to make any level of contribution toward funding the good, which is provided if the cost threshold is reached. Otherwise, contributions are refunded. Conditions ensuring existence and uniqueness of a Bayesian equilibrium are established. Further restricting the threshold uncertainty to a uniform distribution, we show the equilibrium strategies are very simple, even allowing for any number of players with asymmetric distributions of values. Comparative statics with respect to changes in players' distributions are derived, allowing changes in both the intensity and the dispersion of values. For example, increased uncertainty, in the sense of mean-preserving spreads of players' distributions of values, increases equilibrium contributions. Finally, we show the equilibrium is interim incentive inefficient. The sharpness of our results greatly contrasts with the more qualified insights of earlier private-values models with known cost threshold, which relied on there being two symmetric players and generally exhibited multiple equilibria.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 94 (2010)
Issue (Month): 11-12 (December)
Pages: 848-861

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Handle: RePEc:eee:pubeco:v:94:y:2010:i:11-12:p:848-861

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Discrete public good Subscription game Threshold uncertainty;

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References

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  1. Stefano Barbieri & David A. Malueg, 2008. "Private Provision of a Discrete Public Good: Continuous-Strategy Equilibria in the Private-Information Subscription Game," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 529-545, 08.
  2. Ledyard, John & Palfrey, Thomas, 2003. "A general characterization of interim efficient mechanisms for independent linear environments," Working Papers 1186, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
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  16. Satterthwaite, Mark A. & Williams, Steven R., 1989. "Bilateral trade with the sealed bid k-double auction: Existence and efficiency," Journal of Economic Theory, Elsevier, vol. 48(1), pages 107-133, June.
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  18. Cadsby, Charles Bram & Maynes, Elizabeth, 1999. "Voluntary provision of threshold public goods with continuous contributions: experimental evidence," Journal of Public Economics, Elsevier, vol. 71(1), pages 53-73, January.
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Citations

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Cited by:
  1. Stefano Barbieri & David A. Malueg, 2010. "Increasing Fundraising Success by Decreasing Donor Choice," Working Papers 1006, Tulane University, Department of Economics.
  2. Matros, Alexander & Smirnov, Vladimir, 2011. "Treasure game," Working Papers 2011-10, University of Sydney, School of Economics.
  3. Krasteva, Silvana & Yildirim, Huseyin, 2013. "(Un)Informed charitable giving," Journal of Public Economics, Elsevier, vol. 106(C), pages 14-26.
  4. Krasteva, Silvana & Yildirim, Huseyin, 2014. "Reprint of: (Un)Informed charitable giving," Journal of Public Economics, Elsevier, vol. 114(C), pages 108-120.
  5. Zhi Li & Christopher Anderson & Stephen K. Swallow, 2012. "Uniform Price Mechanisms for Threshold Public Goods Provision: An Experimental Investigation," Working Papers 14, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.

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