The Important Thing Is not (Always) Winning but Taking Part: Funding Public Goods with Contests

Marco Faravelli

Research output: Working paperDiscussion paper

Abstract

This paper considers a public good game with heterogeneous endowments
and incomplete information a§ected by extreme free-riding. We overcome this
problem through the implementation of a contest in which several prizes may
be awarded. We identify a monotone equilibrium, in which the contribution
is strictly increasing in the endowment. We 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, we show that private
provision via a contest Pareto-dominates public provision and is higher than
the total contribution raised through a lottery.
Original languageEnglish
PublisherEdinburgh School of Economics Discussion Paper Series
Number of pages19
Publication statusPublished - 28 Mar 2007
Externally publishedYes

Publication series

NameESE Discussion Papers
No.156

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