Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game

Stefano Barbieri () and David Malueg ()

No 902, Working Papers from Tulane University, Department of Economics

Abstract: We analyze a symmetric Bayesian game in which two players individually contribute to fund a discrete public good; contributions are refunded if they do not meet a threshold set by the seller of the good. We provide a general characterization of symmetric equilibrium strategies that are continuous and nonconstant over the set of values for which the good has a positive chance of provision. Piecewise-linear strategies are our special focus. We characterize the distributions of players' private values that can support a continuous piecewise-linear symmetric equilibrium, and we calculate such equilibria for these distributions. Allowing the seller to charge a nonrefundable entry fee before players make their private contributions, we show these piecewise-linear equilibria can maximize the seller's expected utility, which may include an altruistic component, over all incentive compatible selling mechanisms.

Keywords: discrete public good; subscription game; Revelation Principle (search for similar items in EconPapers)
JEL-codes: D61 D82 H41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2009-02
New Economics Papers: this item is included in nep-cta and nep-pbe
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http://repec.tulane.edu/RePEc/pdf/tul0902.pdf First version, 2009 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tul:wpaper:0902

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