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Bayesian Nash Equilibria with a Provision Point: An Experimental Test

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  • Lowell Johnson

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    (Rutgers)

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    Abstract

    This paper extends theory and experimentation in the context of two parties in a group who contribute to a public good with a provision point. This study analyzes the voluntary contributions game in which a public good is provided if and only if the sum of contributions meets or exceeds a threshold. I analyze several Bayesian Nash equilibria in this game and examine their efficiency implications. In an experimental test of a public-goods problem with a threshold and rebate, the observed behavior of the subjects generally was consistent with a linear bidding strategy in which bids increased with realized valuation. Further, the behavior of some subjects was sensitive to changes in the prior distribution of valuations and the relative cost of the public good.

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    File URL: ftp://snde.rutgers.edu/Rutgers/wp/1996-18.pdf
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    Bibliographic Info

    Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199618.

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    Date of creation: 03 Apr 1997
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    Handle: RePEc:rut:rutres:199618

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    Keywords: Bayesian; Bayesian Nash equilibria; contribute; experiment; provision point; public; public good; public goods; threshold; voluntary contribution; voluntary contributions;

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    1. Harrison, Glenn W & McKee, Michael, 1985. "Experimental Evaluation of the Coase Theorem," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 653-70, October.
    2. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. R. Isaac & David Schmidtz & James Walker, 1989. "The assurance problem in a laboratory market," Public Choice, Springer, vol. 62(3), pages 217-236, September.
    4. Hoffman, Elizabeth & Spitzer, Matthew L, 1982. "The Coase Theorem: Some Experimental Tests," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 73-98, April.
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