Multi-Prize Contests as Incentive Mechanisms for the Provision of Public Goods with Heterogenous Agents
29 Pages Posted: 18 Dec 2008
Date Written: October 16, 2008
We analyze if and how multi-prize Tullock contests can be used to guarantee efficient contributions to a public good when agents are heterogenous both with respect to the costs of production of the public good and with respect to the utility from its consumption. With two types of individuals, efficiency can be guaranteed if the following conditions are met: (i) the contest designer can use at least two prizes different from zero, (ii) there is a sufficient number of individuals of each type or types are sufficiently similar and (iii) the reservation utility of the individuals resulting from non-participation is sufficiently low. For a large class of problems it turns out that the optimal prize structure is not monotonic.
Keywords: Public Goods, Contests
JEL Classification: D74, H41, H70, K42
Suggested Citation: Suggested Citation