Equilibrium Selection and Public Good Provision

David Peter Myatt and Chris Wallace

No 103, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Collective action problems arise in a variety of situations. The economic theory of public good provision raises a number of important questions. Who contributes to the public good, and who free rides? How might a social planner exploit the interdependence of decision-making to encourage contributions? Under what conditions will such actions result in public good provision? Using a simple game theoretic framework and recent results from the study of equilibrium selection, this paper attempts to answer some of these questions. Under reasonable assumptions of asymmetry and less than complete information, the more efficient agent will contribute. Contributions can be elicited by `integrating` the production process when agents are sufficiently \emph{optimistic} about the success of the project. When this is not the case, the social planner may be better off `separating` the project so that individual contributions are independent of each other.

Keywords: global games; public good provision; separation and integration (search for similar items in EconPapers)
JEL-codes: C72 C73 H41 (search for similar items in EconPapers)
Date: 2002
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