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  3. American Economic Journal: Microeconomics
  4. November 2016
  5. Achieving Efficiency in Dynamic Contribution Games

Achieving Efficiency in Dynamic Contribution Games

  • Jakša Cvitanić
  • George Georgiadis
American Economic Journal: Microeconomics
vol. 8, no. 4, November 2016
(pp. 309-42)
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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.20160018

Additional 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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