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Contests and the Private Production of Public Goods

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  • Martin Kolmar
  • martin.kolmar@unisg.ch

    (Institute for Public Finance and Financial Law, University of St. Gallen, Varnbüelstrasse 19, CH-9000 St. Gallen, Switzerland; corresponding author)

  • Andreas Wagener

    ()
    (University of Hannover, Department of Economics and Management, Koenigsworther Platz 1, D-30167 Hannover, Germany;)

Abstract

The private provision of public goods generally suffers from two types of efficiency failures: sorting problems (the wrong individuals contribute) and quantity problems (an inefficient amount is provided). Embedding the provision game into a contest that rewards larger contributions with higher probabilities of winning a prize may remedy such failures. Applications include tenure decisions at universities, electoral competition among politicians, etc. We identify a tradeoff between the value of the prize and the decisiveness of the contest. High-powered incentives in contests may cause an overprovision of the public good or wasteful participation of unproductive individuals in the contest. doi: http://dx.doi.org/10.4284/0038-4038-79.1.161

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 79 (2012)
Issue (Month): 1 (July)
Pages: 161-179

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Handle: RePEc:sej:ancoec:v:79:1:y:2012:p:161-179

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Birendra K. Rai & Rajiv Sarin, 2007. "Parametric Contest Success Functions," Jena Economic Research Papers 2007-010, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Subhasish M. Chowdhury & Dongryul Lee & Roman M. Sheremeta, 2011. "Top Guns May Not Fire: Best-Shot Group Contests with Group-Specific Public Good Prizes," University of East Anglia Applied and Financial Economics Working Paper Series 024, School of Economics, University of East Anglia, Norwich, UK..
  3. Jörg Franke & Wolfgang Leininger, 2013. "On the Efficient Provision of Public Goods by Means of Lotteries," Ruhr Economic Papers 0399, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. J. Amegashie, 2006. "A contest success function with a tractable noise parameter," Public Choice, Springer, vol. 126(1), pages 135-144, January.
  5. Julio R. Robledo, 2005. "The Effect of Litigation on Intellectual Property and Welfare," Vienna Economics Papers 0511, University of Vienna, Department of Economics.
  6. Thomas Giebe & Paul Schweinzer, 2013. "Consuming your Way to Efficiency: Public Goods Provision through Non-Distortionary Tax Lotteries," CESifo Working Paper Series 4228, CESifo Group Munich.

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