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The provision point mechanism with reward money

Robertas Zubrickas ()

No 114, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: We modify the provision point mechanism by introducing reward money, which is distributed among the contributors in proportion to their contributions only when the provision point is not reached. In equilibrium, the provision point is always reached as competition for reward money and preference for the public good induce sufficient contributions. In environments without aggregate uncertainty, the mechanism not only ensures allocative efficiency but also distributional. At a specific level of reward money, there is a unique equilibrium, where all consumers contribute the same proportion of their private valuations. The advantages of the mechanism are also demonstrated for collective action problems.

Keywords: Public goods; private provision; provision point mechanism; aggregative game; distributional efficiency; collective action problem (search for similar items in EconPapers)
JEL-codes: C72 D82 H41 (search for similar items in EconPapers)
Date: 2013-02, Revised 2013-10
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-exp and nep-mic
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