Hybrid lotteries for financing public goods
We propose a new, voluntary mechanism (the "hybrid lottery") as a means for financing the provision of public goods. We find that, under some conditions, the mechanism can mitigate the free-riding problem and that, for each player, the (weakly) dominant strategy is the one that -in equilibrium- implements the first best. We also find that the mechanism is quite robust to modifications of the basic model, including heterogeneity in incomes and preferences, different utility functions and incomplete information. Finally, the mechanism is "self-financed"(i.e., it never runs out of money, neither on- nor off-equilibrium path) and -because of the use of dominant strategies- it is very easy to solve by players. Thus, the mechanism is simple to implement in the real world by charities and other organisations that rely on voluntary contributions.
|Date of creation:||2017|
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- Groves, Theodore & Ledyard, John O, 1977.
"Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem,"
Econometric Society, vol. 45(4), pages 783-809, May.
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- Miguel Sánchez Villalba & Silvia Martínez-Gorricho, 2014. "Public Goods: Voluntary Contributions and Risk," Working Papers. Serie AD 2014-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Miguel Sánchez Villalba, 2010. "Tax Evasion as a Global Game (TEGG) in the laboratory," Working Papers. Serie AD 2010-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). Full references (including those not matched with items on IDEAS)
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