Equilibrium selection and public good provision.

Working paper

Collective action problems arise in a variety of situations. The economic theory of public good provision raises a number of important questions. Who contributes to the public good, and who free rides? How might a social planner exploit the interdependence of decision-making to encourage contributions? Under what conditions will such actions result in public good provision? Using a simple game theoretic framework and recent results from the study of equilibrium selection, this paper attempts to answer some of these questions. Under reasonable assumptions of asymmetry and less than complete information, the more efficient agent will contribute. Contributions can be elicited by 'integrating' the production process when agents are sufficiently optimistic about the success of the project. When this is not the case, the social planner may be better off 'separating' the project so that individual contributions are independent of each other.

Authors: Myatt, D; Wallace, C

• Publisher: Department of Economics (University of Oxford)
• Series: Discussion paper series
• Publication date: 2002-01-01
• Language: English