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Contributing or free-riding? Voluntary participation in a public good economy

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  • Konishi, Hideo

    ()
    (Department of Economics, Boston College)

  • Furusawa, Taiji

    ()
    (Department of Economics, Hitotsubashi University)

Abstract

We consider a (pure) public goods provision problem with voluntary participation in a quasi-linear economy. We propose a new hybrid solution concept, the free-riding-proof core (FRP-Core), which endogenously determines a contribution group, public goods provision level, and how to share the provision costs. The FRP-Core is always nonempty in public goods economies but does not usually achieve global efficiency. The FRP-Core has support from both cooperative and noncooperative games. In particular, it is equivalent to the set of perfectly coalition-proof Nash equilibria (Bernheim, Peleg, and Whinston, 1987) of a dynamic game with players' participation decisions followed by a common agency game of public goods provision. We illustrate various properties of the FRP-Core with an example. We also show that the equilibrium level of public goods shrinks to zero as the economy is replicated.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 6 (2011)
Issue (Month): 2 (May)
Pages:

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Handle: RePEc:the:publsh:567

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Web page: http://econtheory.org

Related research

Keywords: Endogenous coalition formation; externalities; public good; perfectly coalition-proof Nash equilibrium; free riders; free-riding-proof core; lobbying; common agency game;

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  1. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954, September.
  2. Palfrey, Thomas R. & Rosenthal, Howard, 1984. "Participation and the provision of discrete public goods: a strategic analysis," Journal of Public Economics, Elsevier, vol. 24(2), pages 171-193, July.
  3. Conley John P., 1994. "Convergence Theorems on the Core of a Public Goods Economy: Sufficient Conditions," Journal of Economic Theory, Elsevier, vol. 62(1), pages 161-185, February.
  4. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
  5. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Laussel, Didier & Le Breton, Michel, 1998. "Efficient Private Production of Public Goods under Common Agency," Games and Economic Behavior, Elsevier, vol. 25(2), pages 194-218, November.
  7. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
  8. Devashish Mitra, 1999. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," American Economic Review, American Economic Association, vol. 89(5), pages 1116-1134, December.
  9. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  10. Konishi, Hideo & Le Breton, Michel & Weber, Shlomo, 1999. "On Coalition-Proof Nash Equilibria in Common Agency Games," Journal of Economic Theory, Elsevier, vol. 85(1), pages 122-139, March.
  11. Paul Healy, 2010. "Equilibrium participation in public goods allocations," Review of Economic Design, Springer, vol. 14(1), pages 27-50, March.
  12. Debraj Ray & Rajiv Vohra, 2001. "Coalitional Power and Public Goods," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1355-1384, December.
  13. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, vol. 75(2), pages 329-348, July.
  14. Laussel, Didier & Le Breton, Michel, 2001. "Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency," Journal of Economic Theory, Elsevier, vol. 100(1), pages 93-128, September.
  15. Saijo, Tatsuyoshi & Yamato, Takehiko, 1999. "A Voluntary Participation Game with a Non-excludable Public Good," Journal of Economic Theory, Elsevier, vol. 84(2), pages 227-242, February.
  16. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 217-25, April.
  17. Maruta, Toshimasa & Okada, Akira, 2005. "Group Formation and Heterogeneity in Collective Action Games," Discussion Papers 2005-07, Graduate School of Economics, Hitotsubashi University.
  18. Milleron, Jean-Claude, 1972. "Theory of value with public goods: A survey article," Journal of Economic Theory, Elsevier, vol. 5(3), pages 419-477, December.
  19. Le Breton, Michel & Salanie, Francois, 2003. "Lobbying under political uncertainty," Journal of Public Economics, Elsevier, vol. 87(12), pages 2589-2610, December.
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Citations

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Cited by:
  1. Federico Quartieri, 2013. "Coalition-proofness under weak and strong Pareto dominance," Social Choice and Welfare, Springer, vol. 40(2), pages 553-579, February.
  2. Ryusuke Shinohara, 2010. "Coalition-proof equilibria in a voluntary participation game," International Journal of Game Theory, Springer, vol. 39(4), pages 603-615, October.
  3. Zudenkova, Galina, 2010. "Sincere Lobby Formation," MPRA Paper 28249, University Library of Munich, Germany.
  4. Hideo Konishi & Ryusuke Shinohara, 2011. "Voluntary Participation and the Provision of Public Goods in Large Finite Economies," Boston College Working Papers in Economics 776, Boston College Department of Economics.
  5. FURUSAWA Taiji & KONISHI Hideo, 2011. "Free-Riding-Proof International Environmental Agreements," Discussion papers 11043, Research Institute of Economy, Trade and Industry (RIETI).
  6. Noriaki Matsushima & Ryusuke Shinohara, 2012. "Private Provision of Public Goods that are Complements for Private Goods: Application to Open Source Software Developments," ISER Discussion Paper 0830, Institute of Social and Economic Research, Osaka University.
  7. Yukihiro Nishimura & Ryusuke Shinohara, 2013. "A voluntary participation game through a unit-by-unit cost share mechanism of a non-excludable public good," Social Choice and Welfare, Springer, vol. 40(3), pages 793-814, March.
  8. Zudenkova, Galina, 2012. "Lobbying as a Guard against Extremism," Working Papers 2072/184036, Universitat Rovira i Virgili, Department of Economics.

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