Econometric Society 57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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GETTING THE BALL ROLLING: VOLUNTARY CONTRIBUTIONS TO A LONG-TERM PUBLIC PROJECT


Category: Economic Theory
Public Goods
Sunday 25th August 2002, 09:30 - 11:00, Room: 5.7
Session Chair(s): Huseyin Yildirim, Duke University, UNITED STATES

Presenter(s): Yildirim, Huseyin

Co-Author(s): none

Keyword(s): Incomplete Information, Long-Term Projects, Markov Game, Voluntary Contributions

JEL(s): C73, D70, H00

Abstract:

I consider an incomplete information model of voluntary contributions to a long term public project. While agents can observe the progress of the project and their own costs of contribution, they have incomplete information about the contribution costs of others. The equilibrium pattern of contributions is influenced by two opposing incentives: First, agents prefer to free ride on others for contributions. Second, agents also wish to encourage each other to contribute by increasing their own contributions. Main findings include: (1) Agents make concessions toward the completion of the project by increasing their contributions as the project moves forward, (2) as additional agents join the group, existing agents increase their contributions in some states and reduce it in others, (3) despite this nonmonotonicity, agents do strictly benefit from additional agents, (4) the project progresses too slowly from the social standpoint.


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Paper Reference Number: 46

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57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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