Achieving Efficiency in Dynamic Contribution Games

Jaksa Cvitanic () and George Georgiadis

American Economic Journal: Microeconomics, 2016, vol. 8, issue 4, 309-42

Abstract: We analyze a game in which a group of agents exerts costly effort over time to make progress on a project. The project is completed once the cumulative effort reaches a prespecified threshold, at which point it generates a lump-sum payoff. We characterize a budget-balanced mechanism that induces each agent to exert the first-best effort level as the outcome of a Markov perfect equilibrium, thus eliminating the free-rider problem. We also show how our mechanism can be adapted to other dynamic games with externalities, such as strategic experimentation and the dynamic extraction of a common resource.

JEL-codes: C73 D62 D82 Q31 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mic.20160018
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Citations: View citations in EconPapers (13)

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