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Achieving Efficiency in Dynamic Contribution Games

Cvitanić, Jakša and Georgiadis, George (2016) Achieving Efficiency in Dynamic Contribution Games. American Economic Journal: Microeconomics, 8 (4). pp. 309-342. ISSN 1945-7669. doi:10.1257/mic.20160018.

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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.

Item Type:Article
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Cvitanić, Jakša0000-0001-6651-3552
Additional Information:© 2016 American Economic Association. We are grateful to Attila Ambrus, Simon Board, Kim Border, Yeon-Koo Che, Larry Kotlikoff, Eddie Lazear, Fei Li, Albert Ma, Niko Matouschek, Moritz Meyer-ter-Vehn, Dilip Mookherjee, Andy Newman, Juan Ortner, Andy Skrzypacz, Chris Tang, Luke Taylor, and Glen Weyl, as well as to seminar audiences at Boston University, Northwestern University (Kellogg), Michigan State University, the University of Pennsylvania, INFORMS 2015, the 2015 Canadian Economic Theory Conference, the Annual 2015 IO Theory Conference, and the 2015 Midwest Economic Theory Conference for numerous comments and suggestions. We thank Maja Kos for excellent editorial assistance. J. Cvitanić acknowledges support from NSF grant DMS 10-08219.
Funding AgencyGrant Number
NSFDMS 10-08219
Issue or Number:4
Classification Code:JEL Classification: C73; D62; D82; Q31
Record Number:CaltechAUTHORS:20161206-105045384
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Official Citation:Cvitanić, Jakša and George Georgiadis. 2016. "Achieving Efficiency in Dynamic Contribution Games." American Economic Journal: Microeconomics, 8(4): 309-42
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:72593
Deposited By: Tony Diaz
Deposited On:06 Dec 2016 19:38
Last Modified:11 Nov 2021 05:03

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