Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring

Guillaume Cheikbossian and Wilfried Sand-Zantman

Annals of Economics and Statistics, 2011, issue 101-102, 327-345

Abstract: This paper develops a two-country model where each country invests in a local public good generating positive cross-countries externalities. In a repeated game setting where the level of public good depends on a non-observable effort by each country plus a random shock, we characterize the existence condition of a cut-off trigger strategy equilibrium inducing full cooperation. Moreover, we show that introducing a small positive correlation between the two country-specific shocks gives rise to a manipulation of information thereby restricting the prospects of cooperation.

Date: 2011
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Working Paper: Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2011:i:101-102:p:327-345

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