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/lp/american-economic-association/achieving-efficiency-in-dynamic-contribution-games-hzqBD0AG0w
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- Publisher
- American Economic Association
- Copyright
- Copyright © 2016 by the American Economic Association
- Subject
- Articles
- ISSN
- 1945-7685
- eISSN
- 1945-7685
- DOI
- 10.1257/mic.20160018
- Publisher site
- See Article on Publisher Site
Abstract
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. (JEL C73, D62, D82, Q31 )
Journal
American Economic Journal: Microeconomics – American Economic Association
Published: Nov 1, 2016