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T-Space at The University of Toronto Libraries >
Theoretical Economics >
Volume 5, Number 2 (May 2010) >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/27187

Title: Common agency and public good provision under asymmetric information
Authors: David Martimort; École des Hautes Études en Sciences Sociales, Toulouse School of Economics
Humberto Moreira; Graduate School of Economics, Fundação Getulio Vargas
Keywords: Common agency, asymmetric information, public goods, ex post and interim efficiency
D82, D86, H41
Issue Date: 17-May-2010
Publisher: Theoretical Economics
Citation: Theoretical Economics; Vol 5, No 2 (2010)
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] The provision of public goods under asymmetric information has most often been viewed as a mechanism design problem under the aegis of an uninformed mediator. This paper focuses on institutional contexts without such mediator. Contributors privately informed on their willingness to pay non-cooperatively offer contribution schedules to an agent who produces the public good on their behalf. In any separating and informative equilibrium of this common agency game under asymmetric information, instead of reducing marginal contributions to free-ride on others, principals do so to screen the agent's endogenous private information obtained from privately observing other principals' offers. Under weak conditions, existence of a differentiable equilibrium is shown. Equilibria are always ex post inefficient and interim efficient if and only if the type distribution has a linear hazard rate. This points at the major inefficiency of contribution games under asymmetric information and stands in sharp contrast with the more positive efficiency result that the common agency literature has unveiled when assuming complete information. Extensions of the model address direct contracting between principals, the existence of pooling uninformative equilibria and the robustness of our findings to the possibility that principals entertain more complex communication with their agent.
URI: http://hdl.handle.net/1807/27187
Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20100159
Rights: Authors who publish in <i>Theoretical Economics</i> will release their articles under the <a href="http://creativecommons.org/licenses/by-nc/2.5/">Creative Commons Attribution-NonCommercial license</a>. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given.
Appears in Collections:Volume 5, Number 2 (May 2010)

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