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.
"Achieving Efficiency in Dynamic Contribution Games."
American Economic Journal: Microeconomics,
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
Asymmetric and Private Information; Mechanism Design
Nonrenewable Resources and Conservation: Demand and Supply; Prices