Threshold Uncertainty in the Private-Information Subscription Game

Stefano Barbieri () and David Malueg ()

No 903, Working Papers from Tulane University, Department of Economics

Abstract: We introduce threshold uncertainty, a la Nitzan and Romano (1990), into a private-values model of voluntary provision of a discrete public good. Players are allowed to make any level of contribution toward funding the good, which is provided only if the cost threshold is reached. Otherwise, contributions are refunded. Conditions ensuring existence and uniqueness of a Bayesian equilibrium are established. Further restricting the threshold uncertainty to a uniform distribution, we show the equilibrium strategies are very simple, even allowing for any number of players with asymmetric distributions of values. Comparative statics with respect to changes in players' distributions are derived, allowing changes in both the intensity and the dispersion of values. Finally, we show the equilibrium is interim incentive inefficient. The sharpness of our results greatly contrasts with the more qualified insights of earlier private-values models with known cost threshold, which relied on there being two symmetric players and generally exhibited multiple equilibria.

Keywords: discrete public good; subscription game; threshold uncertainty (search for similar items in EconPapers)
JEL-codes: D61 D82 H41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2009-02
New Economics Papers: this item is included in nep-cta and nep-pbe
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Citations: View citations in EconPapers (2)

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http://repec.tulane.edu/RePEc/pdf/tul0903.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Threshold uncertainty in the private-information subscription game (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tul:wpaper:0903

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