The Important Thing Is not (Always) Winning but Taking Part: Funding Public Goods with Contests

Marco Faravelli ()

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: This paper considers a public good game with heterogeneous endowments and incomplete information affected by extreme free-riding. We overcome this problem through the implementation of a contest in which several prizes may be awarded. We identify a monotone equilibrium, in which the contribution is strictly increasing in the endowment. We prove that it is optimal for the social planner to set the last prize equal to zero, but otherwise total expected contribution is invariant to the prize structure. Finally, we show that private provision via a contest Pareto-dominates public provision and is higher than the total contribution raised through a lottery.

New Economics Papers: this item is included in nep-mic and nep-pbe
Date: 2007-04
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Persistent link: http://EconPapers.repec.org/RePEc:edn:esedps:156

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