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Dynamic Voluntary Contribution to a Public Project

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  • Leslie M. Marx
  • Steven A. Matthews

Abstract

We consider the dynamic private provision of funds to a project that generates a flow of public benefits. Examples include fund drives for public television or university buildings. The games we study have complete information about payoffs, allow each player to contribute each period, and let each player observe only the aggregate of the other players' past contributions. The symmetric Nash equilibrium outcomes are characterized and shown to be also perfect Bayesian equilibrium outcomes. If the number of periods in which contributions are accepted is large enough, and the players are patient or the period length is short enough, equilibria exist in which the project is eventually or asymptotically completed. Some equilibria with these features are Markov perfect. In some, the time to completion shrinks to zero with the period length--free riding vanishes in the limit. These results are in contrast to those of other models in which allowing repetitive contributions worsens the free riding problem.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1188.

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Date of creation: Jun 1997
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Handle: RePEc:nwu:cmsems:1188

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Web page: http://www.kellogg.northwestern.edu/research/math/
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  1. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
  2. Gradstein, Mark, 1992. "Time Dynamics and Incomplete Information in the Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 581-97, June.
  3. Dorsey, Robert E, 1992. " The Voluntary Contributions Mechanism with Real Time Revisions," Public Choice, Springer, vol. 73(3), pages 261-82, April.
  4. McMillan, John, 1979. "Individual incentives in the supply of public inputs," Journal of Public Economics, Elsevier, vol. 12(1), pages 87-98, August.
  5. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
  6. Fershtman, Chaim & Nitzan, Shmuel, 1991. "Dynamic voluntary provision of public goods," European Economic Review, Elsevier, vol. 35(5), pages 1057-1067, July.
  7. Varian, H.R., 1989. "Sequential Provision Of Public Goods," Papers 89-17, Michigan - Center for Research on Economic & Social Theory.
  8. Admati, Anat R & Perry, Motty, 1991. "Joint Projects without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 259-76, April.
  9. Bernheim, B Douglas, 1986. "On the Voluntary and Involuntary Provision of Public Goods," American Economic Review, American Economic Association, vol. 76(4), pages 789-93, September.
  10. 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.
  11. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
  12. Wirl, Franz, 1996. "Dynamic voluntary provision of public goods: Extension to nonlinear strategies," European Journal of Political Economy, Elsevier, vol. 12(3), pages 555-560, November.
  13. Bagnoli, Mark & Lipman, Barton L, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 583-601, October.
  14. 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.
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