Achieving efficiency in dynamic contribution games

Jakša Cvitanić, George Georgiadis

Research output: Contribution to journalArticle

7 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)309-342
Number of pages34
JournalAmerican Economic Journal: Microeconomics
Volume8
Issue number4
DOIs
StatePublished - Jan 1 2016

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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