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Assurance Payments for Multi-Unit Public Goods Provision: Experiments Motivated by Ecosystem Service Markets

Zhi Li, Pengfei Liu () and Stephen Swallow ()

No 170675, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: In provision point mechanism, the cost threshold for provision introduces incentives for individuals to contribute toward the public good and, in general, the Pareto efficient outcome is a subset of equilibrium outcomes. However, the threshold cannot eliminate the pure free-rider equilibrium unless refinements are used. In this paper, we examine a set of assurance payment schemes for multi-unit public good provision using individualized price auction (IPA). We find assurance payment significantly eliminates non-provision equilibria, and reduces the multiplicity of provision equilibria suffered by most discrete public good provision games, especially in a multi-unit setup. The assurance payments could be useful in establishing markets for a previously non-marketable good, and thus improve the efficiency regarding the provision of various types of public good currently funded only by government or through traditional non-profit donations.

Keywords: Environmental Economics and Policy; Public Economics (search for similar items in EconPapers)
Pages: 28
Date: 2014
New Economics Papers: this item is included in nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:170675

DOI: 10.22004/ag.econ.170675

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