Hybrid lotteries for financing public goods

Sanchez Villalba, Miguel and Martinez Gorricho, Silvia (2017): Hybrid lotteries for financing public goods.

Abstract

We propose a new, voluntary mechanism (the "hybrid lottery") as a means for financing the provision of public goods. We find that, under some conditions, the mechanism can mitigate the free-riding problem and that, for each player, the (weakly) dominant strategy is the one that -in equilibrium- implements the first best. We also find that the mechanism is quite robust to modifications of the basic model, including heterogeneity in incomes and preferences, different utility functions and incomplete information. Finally, the mechanism is "self-financed"(i.e., it never runs out of money, neither on- nor off-equilibrium path) and -because of the use of dominant strategies- it is very easy to solve by players. Thus, the mechanism is simple to implement in the real world by charities and other organisations that rely on voluntary contributions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public Goods; Voluntary Contribution Mechanism; Subsidy Schemes; Laboratory Experiments
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods

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