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Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring

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  • Guillaume Cheikbossian
  • Wilfried Sand-Zantman

Abstract

This paper develops a two-country model where each country invests in a local public good generating positive cross-countries externalities. In a repeated game setting where the level of public good depends on a non-observable effort by each country plus a random shock, we characterize the existence condition of a cut-off trigger strategy equilibrium inducing full cooperation. Moreover, we show that introducing a small positive correlation between the two country-specific shocks gives rise to a manipulation of information thereby restricting the prospects of cooperation.

Suggested Citation

  • Guillaume Cheikbossian & Wilfried Sand-Zantman, 2011. "Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring," Annals of Economics and Statistics, GENES, issue 101-102, pages 327-345.
  • Handle: RePEc:adr:anecst:y:2011:i:101-102:p:327-345
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    Cited by:

    1. David Martimort & Wilfried Sand-Zantman, 2013. "Solving the global warming problem: beyond markets, simple mechanisms may help!," Canadian Journal of Economics, Canadian Economics Association, vol. 46(2), pages 361-378, May.

    More about this item

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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