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On the Efficient Provision of Public Goods by Means of Lotteries

  • Jörg Franke

    ()

  • Wolfgang Leininger

We provide a solution to the free-rider problem in the provision of a public good. To this end we define a biased indirect contribution game which provides the efficient amount of the public good in non-cooperative Nash equilibrium. No confiscatory taxes or other means of coercion are used. We rather extend the model of Morgan (2000), who used fair raffles as voluntary contribution schemes, to unfair or biased raffles, which we show to be equivalent to fair raffles whose tickets are sold to consumers at different individual prices. We give a detailed account of the solution for the case of two different consumers and discuss its implications for the general case of many consumers.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0399.

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Length: 22 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:rwi:repape:0399
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  1. Marco Faravelli, 2007. "The Important Thing Is not (Always) Winning but Taking Part: Funding Public Goods with Contests," ESE Discussion Papers 156, Edinburgh School of Economics, University of Edinburgh.
  2. Martin Kolmar & martin.kolmar@unisg.ch & Andreas Wagener, 2012. "Contests and the Private Production of Public Goods," Southern Economic Journal, Southern Economic Association, vol. 79(1), pages 161-179, July.
  3. Jörg Franke & Christian Kanzow & Wolfgang Leininger & Alexandra Väth, 2009. "Effort Maximization in Asymmetric N-person Contest Games," Ruhr Economic Papers 0130, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Kotchen, Matthew J., 2007. "Equilibrium existence and uniqueness in impure public good models," Economics Letters, Elsevier, vol. 97(2), pages 91-96, November.
  5. Morgan, John, 2000. "Financing Public Goods by Means of Lotteries," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 761-84, October.
  6. Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2013. "Lottery versus All-Pay Auction Contests: A Revenue Dominance Theorem," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79998, Verein für Socialpolitik / German Economic Association.
  7. Jörg Franke & Christian Kanzow & Wolfgang Leininger & Alexandra Schwartz, 2013. "Effort maximization in asymmetric contest games with heterogeneous contestants," Economic Theory, Springer, vol. 52(2), pages 589-630, March.
  8. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, June.
  9. Paul Pecorino & Akram Temimi, 2007. "Lotteries, Group Size, and Public Good Provision," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 451-465, 06.
  10. Richard Cornes & Roger Hartley, 2002. "Asymmetric Contests with General Technologies," Keele Economics Research Papers KERP 2002/22, Centre for Economic Research, Keele University.
  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. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
  13. Lange, Andreas, 2006. "Providing public goods in two steps," Economics Letters, Elsevier, vol. 91(2), pages 173-178, May.
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