The Difficulty of Easy Projects

Wioletta Dziuda, A. Arda Gitmez and Mehdi Shadmehr

American Economic Review: Insights, 2021, vol. 3, issue 3, 285-302

Abstract: We consider binary private contributions to public good projects that succeed when the number of contributors exceeds a threshold. We show that for standard distributions of contribution costs, valuable threshold public good projects are more likely to succeed when they require more contributors. Raising the success threshold reduces free-riding incentives, and this strategic effect dominates the direct effect. Common intuition that easier projects are more likely to succeed only holds for cost distributions with right tails fatter than Cauchy. Our results suggest government grants can reduce the likelihood that valuable threshold public good projects succeed.

JEL-codes: D71 H41 H81 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/aeri.20200311

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