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Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring

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  • Cheikbossian, Guillaume
  • Sand-Zantman, Wilfried

Abstract

This paper develops a two-country model where each country invests in a local public good generating positive cross-countries externalities. In a repeated game setting where the level of public good depends on a non-observable effort by each country plus a random shock, we characterize the existence condition of a cut-off trigger strategy equilibrium inducing full cooperation. Moreover, we show that introducing a small positive correlation between the two country-specific shocks gives rise to a manipulation of information thereby restricting the prospects of cooperation.
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Suggested Citation

  • Cheikbossian, Guillaume & Sand-Zantman, Wilfried, 2008. "Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring," IDEI Working Papers 527, Institut d'Économie Industrielle (IDEI), Toulouse.
  • Handle: RePEc:ide:wpaper:9498
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    References listed on IDEAS

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    Cited by:

    1. David Martimort & Wilfried Sand‐Zantman, 2013. "Solving the global warming problem: beyond markets, simple mechanisms may help!," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(2), pages 361-378, May.
    2. Gorkem Celik & Dongsoo Shin & Roland Strausz, 2021. "Public good overprovision by a manipulative provider," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 314-333, June.

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    More about this item

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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