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Equilibrium Participation in Public Goods Allocations

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Abstract

An alternative notion of individual rationality for mechanism design is studied in which mechanisms suggest public goods allocations and individuals then choose whether or not to submit their requested transfer to the central planner. The set of allocations such that unanimous participation is a Nash equilibrium is shown to be sub-optimal in a wide variety of environments and shrinks to the endowment as the economy is replicated. Therefore, any non-trivial mechanism suffers from non-participation in the selected outcome when agents cannot be coerced to contribute.

Suggested Citation

  • Paul Healy, 2005. "Equilibrium Participation in Public Goods Allocations," GSIA Working Papers 2006-E7, Carnegie Mellon University, Tepper School of Business.
    • Handle: RePEc:cmu:gsiawp:379933039
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    1. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
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    3. Jackson, Matthew O. & Palfrey, Thomas R., 2001. "Voluntary Implementation," Journal of Economic Theory, Elsevier, vol. 98(1), pages 1-25, May.
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    5. Cason, Timothy N. & Saijo, Tatsuyoshi & Yamato, Takehiko & Yokotani, Konomu, 2004. "Non-excludable public good experiments," Games and Economic Behavior, Elsevier, vol. 49(1), pages 81-102, October.
    6. Richter, Donald K, 1974. "The Core of a Public Goods Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 131-142, February.
    7. Saijo, Tatsuyoshi & Yamato, Takehiko, 1999. "A Voluntary Participation Game with a Non-excludable Public Good," Journal of Economic Theory, Elsevier, vol. 84(2), pages 227-242, February.
    8. Hurwicz, Leonid, 1979. "On allocations attainable through Nash equilibria," Journal of Economic Theory, Elsevier, vol. 21(1), pages 140-165, August.
    9. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
    10. Matthew O. Jackson & Thomas R. Palfrey, 1998. "Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining," Econometrica, Econometric Society, vol. 66(6), pages 1353-1388, November.
    11. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    12. John Ledyard & John Roberts, 1975. "On the Incentive Problem with Public Goods," Discussion Papers 116, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    13. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
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    Cited by:

    1. Hideo Konishi & Ryusuke Shinohara, 2011. "Voluntary Participation and the Provision of Public Goods in Large Finite Economies," Boston College Working Papers in Economics 776, Boston College Department of Economics.
    2. Konishi, Hideo & Furusawa, Taiji, 2011. "Contributing or free-riding? Voluntary participation in a public good economy," Theoretical Economics, Econometric Society, vol. 6(2), May.
    3. Hideo Konishi & Ryusuke Shinohara, 2014. "Voluntary Participation and Provision of Public Goods in Large Finite Economies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 173-195, April.
    4. Noriaki Matsushima & Ryusuke Shinohara, 2015. "The efficiency of monopolistic provision of public goods through simultaneous bilateral bargaining," ISER Discussion Paper 0948, Institute of Social and Economic Research, Osaka University.
    5. Ryusuke Shinohara, 2014. "Participation and demand levels for a joint project," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(4), pages 925-952, December.
    6. Grüner, Hans Peter & Koriyama, Yukio, 2012. "Public goods, participation constraints, and democracy: A possibility theorem," Games and Economic Behavior, Elsevier, vol. 75(1), pages 152-167.
    7. Grüner, Hans Peter, 2008. "Public goods, participation constraints, and democracy: A possibility theorem," CEPR Discussion Papers 7066, C.E.P.R. Discussion Papers.
    8. Noriaki Matsushima & Ryusuke Shinohara, 2012. "Private Provision of Public Goods that are Complements for Private Goods: Application to Open Source Software Developments," ISER Discussion Paper 0830, Institute of Social and Economic Research, Osaka University.
    9. Yukihiro Nishimura & Ryusuke Shinohara, 2013. "A voluntary participation game through a unit-by-unit cost share mechanism of a non-excludable public good," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(3), pages 793-814, March.

    More about this item

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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