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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title The provision point mechanism with reward money
Organization Unit
  • Robertas Zubrickas
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 114
ISSN 1664-7041
Number of Pages 20
Date 2013
Abstract Text We modify the provision point mechanism by introducing reward money, which is distributed among the contributors in proportion to their contributions only when the provision point is not reached. In equilibrium, the provision point is always reached as competition for reward money and preference for the public good induce sufficient contributions. In environments without aggregate uncertainty, the mechanism not only ensures allocative efficiency but also distributional. At a specific level of reward money, there is a unique equilibrium, where all consumers contribute the same proportion of their private valuations. The advantages of the mechanism are also demonstrated for collective action problems.
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Keywords Public goods, private provision, provision point mechanism, aggregative game, distributional efficiency, collective action problem, Öffentliches Gut, Kollektives Handeln, Trittbrettfahrerverhalten
Additional Information Revised version