Contests and the Private Provision of Public Goods

31 Pages Posted: 18 Dec 2008

See all articles by Martin Kolmar

Martin Kolmar

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG); CESifo (Center for Economic Studies and Ifo Institute)

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

Date Written: October 20, 2008

Abstract

The private provision of public goods suffers from two potential types of efficiency failures: non-optimal output levels of the public good (quantity problem) and an inefficient mix of contributors and non-contributors (sorting problem). Embedding the provision game into a contest that rewards larger contributions by a higher probability of winning a prize may remedy these failures. Applications include tenure decisions at universities, electoral competition among politicians, or incentives in teams. We characterize the general structure of contests that support efficient allocations. In general, efficiency requires a negative relationship between prize and the decisiveness of the contest. We illustrate our findings with the example of Tullock-type contests.

Keywords: Public Goods, Contests

JEL Classification: D74, H41, H70, K42

Suggested Citation

Kolmar, Martin and Wagener, Andreas, Contests and the Private Provision of Public Goods (October 20, 2008). U. of St. Gallen Law & Economics Working Paper No. 2008-27, Available at SSRN: https://ssrn.com/abstract=1316277 or http://dx.doi.org/10.2139/ssrn.1316277

Martin Kolmar (Contact Author)

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG) ( email )

Varnbüelstrasse 14
CH-9000 St. Gallen
Switzerland
+41 (0)71 224 25 35 (Phone)
+41 (0)71 224 23 02 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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