Logo Logo

Achieving Efficiency in Dynamic Contribution Games, American Economic Journal: Microeconomics

Abstract

We analyze a game in which a group of agents exert costly effort over time to make progress on a project. The project is completed once the cumulative efforts reach a pre-specified 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. This mechanism specifies for each agent flow payments that he must make while the project is in progress, and a reward that is payable upon completion. 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.

Type

Article

Author(s)

Jaksa Cvitanic, George Georgiadis

Date Published

2016

Citations

Cvitanic, Jaksa, and George Georgiadis. 2016. Achieving Efficiency in Dynamic Contribution Games. American Economic Journal: Microeconomics. 8(4): 309-342.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more