Private Provision of Public Goods: Uniform Price Mechanisms with a Threshold and Dynamics with a Tipping Point

Abstract

This dissertation comprises three manuscripts, all contributing to the literature of the private provision of public goods. In Chapters 2 (complete information, CI) and 3 (private value information, PI), we introduce two novel mechanisms for provision point public goods: The uniform price auction mechanism (UPA) collects an endogenously determined uniform price from everyone offering at least that price, while the uniform price cap mechanism (UPC) collects the uniform price from everyone offering at least that price, plus the full offer of everyone offering less. With CI, UPC has the same undominated perfect equilibria as standard provision point (PPM) and proportional rebate (PR) mechanisms—and UPA a somewhat broader set—but our mechanisms’ wide-range-of-zero-marginal penalty structures may facilitate equilibrium selection and lead to higher contributions and more frequent provision. With PI, the uniform price mechanisms support Bayesian Nash equilibria (BNE) with higher contributions than the BNE of PPM or PR, potentially increasing efficiency. Our mechanisms outperform PR and PPM in both information environments in laboratory experiments: in general, UPC generates higher aggregate contributions and provision rates than PR and PPM; UPA attracts much higher contributions, although it provides less frequently. The ranking emerges because high offers are more common (especially among high-value people) in the uniform price mechanisms, where it is low cost to venture high offers to potentially meet other high offers to support provision. In Chapter 4, we study durable public good games with a tipping point, below which collapsing the stock is optimal. With a payoff function linear in stock and income and a logistic growth function, we show the existence of a tipping point. Further, under a dynamic voluntary contribution mechanism (DVCM), both the open-loop equilibrium and the Markov perfect equilibrium (MPE) result in socially inefficiently low steady states and higher tipping points. Better outcomes can be supported in the MPE than in the open-loop solution and the highest stable steady state in the MPE approaches the efficient level asymptotically as the discount rate approaches zero. Lastly, we extend DVCM, introducing a provision point in a dynamic provision point mechanism (DPPM) and we show that the most rapid approach path to the efficient stock is supported in a MPE of DPPM.