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Threshold Uncertainty 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 introduce threshold uncertainty, a la Nitzan and Romano (1990), into a private-values model of voluntary provision of a discrete public good. Players are allowed to make any level of contribution toward funding the good, which is provided only if the cost threshold is reached. Otherwise, contributions are refunded. Conditions ensuring existence and uniqueness of a Bayesian equilibrium are established. Further restricting the threshold uncertainty to a uniform distribution, we show the equilibrium strategies are very simple, even allowing for any number of players with asymmetric distributions of values. Comparative statics with respect to changes in players' distributions are derived, allowing changes in both the intensity and the dispersion of values. Finally, we show the equilibrium is interim incentive inefficient. The sharpness of our results greatly contrasts with the more qualified insights of earlier private-values models with known cost threshold, which relied on there being two symmetric players and generally exhibited multiple equilibria.

Suggested Citation

  • Stefano Barbieri & David A. Malueg, 2009. "Threshold Uncertainty in the Private-Information Subscription Game," Working Papers 0903, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:0903
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    File URL: http://econ.tulane.edu/RePEc/pdf/tul0903.pdf
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    References listed on IDEAS

    as
    1. Palfrey, Thomas R. & Rosenthal, Howard, 1984. "Participation and the provision of discrete public goods: a strategic analysis," Journal of Public Economics, Elsevier, pages 171-193.
    2. Alboth, Dirk & Lerner, Anat & Shalev, Jonathan, 2001. " Profit Maximizing in Auctions of Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 501-525.
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    13. Ledyard, John O. & Palfrey, Thomas R., 2007. "A general characterization of interim efficient mechanisms for independent linear environments," Journal of Economic Theory, Elsevier, pages 441-466.
    14. Stefano Barbieri & David A. Malueg, 2008. "Private Provision of a Discrete Public Good: Continuous-Strategy Equilibria in the Private-Information Subscription Game," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 529-545, August.
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    Citations

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    Cited by:

    1. Krasteva, Silvana & Yildirim, Huseyin, 2013. "(Un)Informed charitable giving," Journal of Public Economics, Elsevier, pages 14-26.
    2. Zhi Li & Christopher Anderson & Stephen K. Swallow, 2012. "Uniform Price Mechanisms for Threshold Public Goods Provision: An Experimental Investigation," Working Papers 14, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    3. Matros, Alexander & Smirnov, Vladimir, 2011. "Treasure game," Working Papers 2011-10, University of Sydney, School of Economics, revised May 2014.
    4. Krasteva, Silvana & Yildirim, Huseyin, 2014. "Reprint of: (Un)Informed charitable giving," Journal of Public Economics, Elsevier, pages 108-120.
    5. Li, Zhi & Anderson, Christopher M. & Swallow, Stephen K., 2016. "Uniform price mechanisms for threshold public goods provision with complete information: An experimental investigation," Journal of Public Economics, Elsevier, pages 14-26.
    6. Stefano Barbieri & David A. Malueg, 2014. "Increasing Fundraising Success by Decreasing Donor Choice," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 372-400, June.

    More about this item

    Keywords

    discrete public good; subscription game; threshold uncertainty;

    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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