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Public good overprovision by a manipulative provider

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  • Gorkem Celik
  • Dongsoo Shin
  • Roland Strausz

Abstract

We study contracting between a public good provider and users with private valuations of the good. We show that, once the provider extracts the users' private information, she benefits from manipulating the collective information received from all users when communicating with them. We derive conditions under which such manipulation determines the direction of distortions in public good provision. If the provider is non‐manipulative, the public good is always underprovided, whereas overprovision occurs with a manipulative provider. With overprovision, not only high‐valuation users, but also low‐valuation users may obtain positive rents—users may prefer facing a manipulative provider.

Suggested Citation

  • Gorkem Celik & Dongsoo Shin & Roland Strausz, 2021. "Public good overprovision by a manipulative provider," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 314-333, June.
    • Handle: RePEc:bla:randje:v:52:y:2021:i:2:p:314-333
    DOI: 10.1111/1756-2171.12370
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    1. Gorkem Celik & Dongsoo Shin & Roland Strausz, 2023. "Aggregate Information and Organizational Structures," Journal of Industrial Economics, Wiley Blackwell, vol. 71(1), pages 256-290, March.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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