Public Good Agreements under the Weakest-link Technology

Alejandro Caparros () and Michael Finus ()
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Alejandro Caparros: Institute for Public Goods and Policies, Spanish National Research Council

No 2019-13, Graz Economics Papers from University of Graz, Department of Economics

Abstract: We analyze the formation of public good agreements under the weakest-link technology. Whereas policy coordination is not necessary for symmetric players, it matters for asymmetric players; however, this fails in the absence of transfers. By contrast, with a transfer scheme, asymmetry may be an asset for cooperation. We characterize various types and degrees of asymmetry and relate them to the stability of self-enforcing agreements. Asymmetric distributions of autarky public good provision levels (also representing asymmetric interests in cooperation) that are positively skewed tend to be conducive to the stability of agreements. We show that under such conditions, even a coalition including all players can be stable. However, asymmetries that foster stability (instability) tend to be associated with low (high) gains from cooperation. We analyze the formation of public good agreements under the weakest-link technology. Whereas policy coordination is not necessary for symmetric players, it matters for asymmetric players; however, this fails in the absence of transfers. By contrast, with a transfer scheme, asymmetry may be an asset for cooperation. We characterize various types and degrees of asymmetry and relate them to the stability of self-enforcing agreements. Asymmetric distributions of autarky public good provision levels (also representing asymmetric interests in cooperation) that are positively skewed tend to be conducive to the stability of agreements. We show that under such conditions, even a coalition including all players can be stable. However, asymmetries that foster stability (instability) tend to be associated with low (high) gains from cooperation.

Keywords: Public goods; weakest-link technology; agreement formation (search for similar items in EconPapers)
JEL-codes: C7 D7 H4 H7 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-cdm and nep-gth
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Public good agreements under the weakest‐link technology (2020)
Working Paper: Public Good Agreements under the Weakest-link Technology (2019)
Working Paper: Public Good Agreements under the Weakest-link Technology (2016)
Working Paper: Public good agreements under the weakest-link technology (2016)
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