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The provision point mechanism with reward money


Zubrickas, Robertas (2013). The provision point mechanism with reward money. Working paper series / Department of Economics 114, University of Zurich.

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.

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.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C72, D82, H41
Uncontrolled Keywords:Public goods, private provision, provision point mechanism, aggregative game, distributional efficiency, collective action problem
Language:English
Date:October 2013
Deposited On:26 Feb 2013 13:46
Last Modified:21 Nov 2017 16:36
Series Name:Working paper series / Department of Economics
Number of Pages:20
ISSN:1664-7041
Additional Information:Revised version
Official URL:http://www.econ.uzh.ch/static/wp/econwp114.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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