American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Achieving Efficiency in Dynamic Contribution Games
American Economic Journal: Microeconomics
vol. 8,
no. 4, November 2016
(pp. 309–42)
Abstract
We analyze a game in which a group of agents exerts costly effort over time to make progress on a project. The project is completed once the cumulative effort reaches a prespecified threshold, at which point it generates a lump-sum payoff. We characterize a budget-balanced mechanism that induces each agent to exert the first-best effort level as the outcome of a Markov perfect equilibrium, thus eliminating the free-rider problem. We also show how our mechanism can be adapted to other dynamic games with externalities, such as strategic experimentation and the dynamic extraction of a common resource.Citation
Cvitanić, Jakša, and George Georgiadis. 2016. "Achieving Efficiency in Dynamic Contribution Games." American Economic Journal: Microeconomics, 8 (4): 309–42. DOI: 10.1257/mic.20160018Additional Materials
JEL Classification
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- D62 Externalities
- D82 Asymmetric and Private Information; Mechanism Design
- Q31 Nonrenewable Resources and Conservation: Demand and Supply; Prices
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