Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game
AbstractWe 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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Bibliographic InfoPaper provided by Tulane University, Department of Economics in its series Working Papers with number 0902.
Length: 32 pages
Date of creation: Feb 2009
Date of revision:
discrete public good; subscription game; Revelation Principle;
Find related papers by JEL classification:
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-14 (All new papers)
- NEP-CTA-2009-02-14 (Contract Theory & Applications)
- NEP-PBE-2009-02-14 (Public Economics)
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