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Subsidization to induce tipping

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  • Shafran, Aric P.
  • Lepore, Jason J.

Abstract

In binary choice games with strategic complementarities and multiple equilibria, we characterize the minimal cost subsidy program to guarantee agents play the Pareto optimal equilibrium. These subsidies are generally asymmetric, whether or not agents are identical and even if private values are anonymous.

Suggested Citation

  • Shafran, Aric P. & Lepore, Jason J., 2011. "Subsidization to induce tipping," Economics Letters, Elsevier, vol. 110(1), pages 32-35, January.
    • Handle: RePEc:eee:ecolet:v:110:y:2011:i:1:p:32-35
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    References listed on IDEAS

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    1. Richard Cornes, 1993. "Dyke Maintenance and Other Stories: Some Neglected Types of Public Goods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 259-271.
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    3. Azariadis, Costas, 1996. "The Economics of Poverty Traps: Part One: Complete Markets," Journal of Economic Growth, Springer, vol. 1(4), pages 449-496, December.
    4. Kunreuther, Howard & Heal, Geoffrey, 2003. "Interdependent Security," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 231-249, March-May.
    5. Geoffrey Heal & Howard Kunreuther, 2010. "Social Reinforcement: Cascades, Entrapment, and Tipping," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 86-99, February.
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    Cited by:

    1. Geoffrey Heal & Howard Kunreuther, 2017. "An alternative framework for negotiating climate policies," Climatic Change, Springer, vol. 144(1), pages 29-39, September.
    2. Stephan Kroll & Aric P. Shafran, 2018. "Spatial externalities and risk in interdependent security games," Journal of Risk and Uncertainty, Springer, vol. 56(3), pages 237-257, June.

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