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Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game

Author

Listed:
  • Stefano Barbieri

    () (Department of Economics, Tulane University)

  • David A. Malueg

    () (Department of Economics, UC Riverside)

Abstract

We analyze a symmetric Bayesian game in which two players individually contribute to fund a discrete public good; contributions are refunded if they do not meet a threshold set by the seller of the good. We provide a general characterization of symmetric equilibrium strategies that are continuous and nonconstant over the set of values for which the good has a positive chance of provision. Piecewise-linear strategies are our special focus. We characterize the distributions of players' private values that can support a continuous piecewise-linear symmetric equilibrium, and we calculate such equilibria for these distributions. Allowing the seller to charge a nonrefundable entry fee before players make their private contributions, we show these piecewise-linear equilibria can maximize the seller's expected utility, which may include an altruistic component, over all incentive compatible selling mechanisms.

Suggested Citation

  • Stefano Barbieri & David A. Malueg, 2009. "Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game," Working Papers 0902, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:0902
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    File URL: http://econ.tulane.edu/RePEc/pdf/tul0902.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Andrews, Donald W.K. & Moreira, Marcelo J. & Stock, James H., 2007. "Performance of conditional Wald tests in IV regression with weak instruments," Journal of Econometrics, Elsevier, pages 116-132.
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    More about this item

    Keywords

    discrete public good; subscription game; Revelation Principle;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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