Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game

34 Pages Posted: 4 Jul 2007 Last revised: 4 Jun 2008

See all articles by Stefano Barbieri

Stefano Barbieri

Tulane University - Department of Economics

David A. Malueg

University of California Riverside

Date Written: May 26, 2008

Abstract

We analyze a symmetric Bayesian game in which two players individually contribute to fund a discrete public good; contributions are refunded if they do not meet a threshold set by the seller of the good. We provide a general characterization of symmetric equilibrium strategies that are continuous and nonconstant over the set of values for which the good has a positive chance of provision. Piecewise-linear strategies are our special focus. We characterize the distributions of players' private values that can support a continuous piecewise-linear symmetric equilibrium, and we calculate such equilibria for these distributions. Allowing the seller to charge a nonrefundable entry fee before players make their private contributions, we show these piecewise-linear equilibria can maximize the seller's expected utility, which may include an altruistic component, over all incentive compatible selling mechanisms. Complementing the possible optimality of the subscription game, we show that the mechanism in which players' contributions are not refunded is generically suboptimal.

Keywords: discrete public good, subscription game, Revelation Principle

JEL Classification: H41, D61, D82

Suggested Citation

Barbieri, Stefano and Malueg, David A., Optimal Provision of a Discrete Public Good: Linear Equilibria in the Private-Information Subscription Game (May 26, 2008). Available at SSRN: https://ssrn.com/abstract=998046 or http://dx.doi.org/10.2139/ssrn.998046

Stefano Barbieri

Tulane University - Department of Economics ( email )

New Orleans, LA 70118
United States

David A. Malueg (Contact Author)

University of California Riverside ( email )

Economics Department
3136 Sproul Hall
Riverside, CA 92505
United States
951 827 1494 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
89
Abstract Views
670
rank
287,905
PlumX Metrics