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Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game

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Author Info

  • Stefano Barbieri

    ()
    (Department of Economics, Tulane University)

  • David A. Malueg

    ()
    (Department of Economics, UC Riverside)

Abstract

We analyze a symmetric Bayesian game in which two players individually contribute to fund a discrete public good; contributions are refunded if they do not meet a threshold set by the seller of the good. We provide a general characterization of symmetric equilibrium strategies that are continuous and nonconstant over the set of values for which the good has a positive chance of provision. Piecewise-linear strategies are our special focus. We characterize the distributions of players' private values that can support a continuous piecewise-linear symmetric equilibrium, and we calculate such equilibria for these distributions. Allowing the seller to charge a nonrefundable entry fee before players make their private contributions, we show these piecewise-linear equilibria can maximize the seller's expected utility, which may include an altruistic component, over all incentive compatible selling mechanisms.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul0902.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 0902.

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Length: 32 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:tul:wpaper:0902

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Keywords: discrete public good; subscription game; Revelation Principle;

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