Hybrid lotteries for financing public goods

Miguel Sanchez Villalba and Silvia Martinez Gorricho

MPRA Paper from University Library of Munich, Germany

Abstract: We propose a new, voluntary mechanism (the "hybrid lottery") as a means for financing the provision of public goods. We find that, under some conditions, the mechanism can mitigate the free-riding problem and that, for each player, the (weakly) dominant strategy is the one that -in equilibrium- implements the first best. We also find that the mechanism is quite robust to modifications of the basic model, including heterogeneity in incomes and preferences, different utility functions and incomplete information. Finally, the mechanism is "self-financed"(i.e., it never runs out of money, neither on- nor off-equilibrium path) and -because of the use of dominant strategies- it is very easy to solve by players. Thus, the mechanism is simple to implement in the real world by charities and other organisations that rely on voluntary contributions.

Keywords: Public Goods; Voluntary Contribution Mechanism; Subsidy Schemes; Laboratory Experiments (search for similar items in EconPapers)
JEL-codes: C72 C92 H41 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-des, nep-gth and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:80823

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