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The provision point mechanism with reward money

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  • Robertas Zubrickas

Abstract

We modify the provision point mechanism by introducing reward money, which is distributed among the contributors in proportion to their contributions only when the provision point is not reached. In equilibrium, the provision point is always reached as competition for reward money and preference for the public good induce sufficient contributions. In environments without aggregate uncertainty, the mechanism not only ensures allocative efficiency but also distributional. At a specific level of reward money, there is a unique equilibrium, where all consumers contribute the same proportion of their private valuations. The advantages of the mechanism are also demonstrated for collective action problems.

Suggested Citation

  • Robertas Zubrickas, 2013. "The provision point mechanism with reward money," ECON - Working Papers 114, Department of Economics - University of Zurich, revised Oct 2013.
  • Handle: RePEc:zur:econwp:114
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    File URL: http://www.econ.uzh.ch/static/wp/econwp114.pdf
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    Cited by:

    1. Zubrickas, Robertas, 2014. "The provision point mechanism with refund bonuses," Journal of Public Economics, Elsevier, vol. 120(C), pages 231-234.
    2. Se-il Mun, 2016. "Joint Provision of International Transport Infrastructure," Discussion papers e-15-015, Graduate School of Economics , Kyoto University.

    More about this item

    Keywords

    Public goods; private provision; provision point mechanism; aggregative game; distributional efficiency; collective action problem;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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