Collective Choice in Dynamic Public Good Provision

T. Renee Bowen, George Georgiadis, Nicolas S. Lambert

NBER Working Paper No. 22772
Issued in October 2016
NBER Program(s):Industrial Organization, International Trade and Investment, Public Economics, Political Economy, Productivity, Innovation, and Entrepreneurship

Two heterogeneous agents contribute over time to a joint project, and collectively decide its scope. A larger scope requires greater cumulative effort and delivers higher benefits upon completion. We show that the efficient agent prefers a smaller scope, and preferences are time-inconsistent: as the project progresses, the efficient (inefficient) agent’s preferred scope shrinks (expands). We characterize the equilibrium outcomes under dictatorship and unanimity, with and without commitment. We find that an agent’s degree of efficiency is a key determinant of control over project scopes. From a welfare perspective, it may be desirable to allocate decision rights to the inefficient agent.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w22772

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