Coordination and Provision of a Discrete Public Good by Correlated Equilibria
by
Alberto Cavaliere
Università degli Studi di Pavia

The strategic analysis of the private provision of discrete public goods has shown the existence of multiple Nash Equilibria with the efficient number of players voluntarily contributing. However the coordination issue is left unexplained by this literature. The experimental evidence shows that communication among players is helpful to achieve ccoperation.We claim that, from the theoretical point of view, this is equivalent to playing correlated equilibria in an extended public good game with communication, modelled as Chicken. We characterise such equilibria as feasible cordination mechanisms to achieve public goods provision in the general contribution game.We further introduce a second kind of game characterised by pay-off externalities that may persist after the minimal threshold of contributors is achieved. While it is easy to show the existence of Pareto efficient correlated equilibria in the first game, in the second one players face incentive problems such that a first best cannot always be an equilibrium. Nevertheless there exist correlated equilibria that can be qualified as incentive efficient mechanisms, once free riding is seen as a moral hazard issue. Finally, with an example, we discuss the impact of coalition formation in our framework.

JEL Classification:C72,D79,D89,H41

Date received: April 28, 2000

Copyright © 2000 by the author(s). The author(s) of this document and the organizers of the conference have granted their consent to include this abstract in Atlas Conferences Inc. Document # caez-76.