Common Agency and Public Good Provision under Asymmetric Information
AbstractThe provision of public goods under asymmetric information has most often been viewed as a mechanism design problem under the aegis of an uninformed mediator. This paper focuses on institutional contexts without such mediator. Contributors privately informed on their willingness to pay non-cooperatively offer contribution schedules to an agent who produces the public good on their behalf. In any separating and informative equilibrium of this common agency game under asymmetric information, instead of reducing marginal contributions to free-ride on others, principals do so to screen the agent's endogenous private information obtained from privately observing other principals' offers. Under weak conditions, existence of a differentiable equilibrium is shown. Equilibria are always ex post inefficient and interim efficient if and only if the type distribution has a linear hazard rate. This points at the major inefficiency of contribution games under asymmetric information and stands in sharp contrast with the more positive efficiency result that the common agency literature has unveiled when assuming complete information. Extensions of the model address direct contracting between principals, the existence of pooling uninformative equilibria and the robustness of our findings to the possibility that principals entertain more complex communication with their agent.
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Bibliographic InfoPaper provided by University of Toulouse 1 Capitole in its series Open Access publications from University of Toulouse 1 Capitole with number http://neeo.univ-tlse1.fr/2677/.
Date of creation: May 2010
Date of revision:
Publication status: Published in Theoretical Economics (2010-05) v.5, p.159-213
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Web page: http://www.univ-tlse1.fr/
Other versions of this item:
- Martimort, David & Moreira, Humberto, 2010. "Common agency and public good provision under asymmetric information," Theoretical Economics, Econometric Society, vol. 5(2), May.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
- NEP-CTA-2010-08-14 (Contract Theory & Applications)
- NEP-PBE-2010-08-14 (Public Economics)
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