Assurance Payments for Multi-Unit Public Goods Provision: Experiments Motivated by Ecosystem Service Markets
Pengfei Liu () and
Stephen Swallow ()
No 170675, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association
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)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:170675
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