Participation and Demand Levels for a Joint Project

34 Pages Posted: 11 Jul 2012 Last revised: 3 Feb 2014

Ryusuke Shinohara

Department of Economics, Hosei University

Date Written: January 30, 2014

Abstract

We examine a voluntary participation game in public good provision in which each agent has a demand level for the public good. The agent's demand level is the minimum level of the public good from which she can receive a positive benefit. In this game, there exists a subgame perfect Nash equilibrium at which the (Pareto) efficient allocation is achieved. The voluntary participation game may also have a subgame perfect Nash equilibrium with underprovision of the public good. However, some subgame perfect Nash equilibrium with the efficient allocation satisfies strong perfection, introduced by Rubinstein (1980), and strong perfection is satisfied only by the subgame perfect Nash equilibrium with the efficient allocation. Furthermore, all payoffs at strong perfect equilibria belong to the core of the enterprise game. By these results, we conclude that in our case, the voluntary participation problem is not as serious as the earlier studies report. We also discuss the extensibility of these results.

Keywords: Public good, Participation, Demand level, Threshold

JEL Classification: C72, H41

Suggested Citation

Shinohara, Ryusuke, Participation and Demand Levels for a Joint Project (January 30, 2014). Social Choice and Welfare, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2103412 or http://dx.doi.org/10.2139/ssrn.2103412

Ryusuke Shinohara (Contact Author)

Department of Economics, Hosei University ( email )

4342
Aihara-machi
Machida, Tokyo 194-0298
Japan
+81-42-783-2534 (Phone)

HOME PAGE: http://ryusukeshinohara.ehoh.net/

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