The Important Thing Is Not (Always) Winning but Taking Part: Funding Public Goods with Contests |
| |
Authors: | MARCO FARAVELLI |
| |
Affiliation: | University of Queensland |
| |
Abstract: | This paper considers a public good game with heterogeneous endowments and incomplete information affected by extreme free riding. I overcome this problem through the implementation of a deterministic contest in which several prizes may be awarded. I identify a monotone equilibrium, in which the contribution is strictly increasing in the endowment. I prove that it is optimal for the social planner to set the last prize equal to zero, but otherwise total expected contribution is invariant to the prize structure. Finally, I show that private provision via a contest Pareto‐dominates public provision and is higher than the total contribution raised through a lottery. |
| |
Keywords: | |
|
|