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Contests and the Private Production of Public Goods

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  • Martin Kolmar
  • Andreas Wagener

Abstract

The private provision of public goods generally suffers from two types of efficiency failures: sorting problems (the wrong individuals contribute) and quantity problems (an inefficient amount is provided). Embedding the provision game into a contest that rewards larger contributions with higher probabilities of winning a prize may remedy such failures. Applications include tenure decisions at universities, electoral competition among politicians, etc. We identify a tradeoff between the value of the prize and the decisiveness of the contest. High‐powered incentives in contests may cause an overprovision of the public good or wasteful participation of unproductive individuals in the contest.

Suggested Citation

  • Martin Kolmar & Andreas Wagener, 2012. "Contests and the Private Production of Public Goods," Southern Economic Journal, John Wiley & Sons, vol. 79(1), pages 161-179, July.
    • Handle: RePEc:wly:soecon:v:79:y:2012:i:1:p:161-179
    DOI: 10.4284/0038-4038-79.1.161
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    References listed on IDEAS

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    Cited by:

    1. Liu, Tracy Xiao & Lu, Jingfeng & Wang, Zhewei, 2022. "Efficient public good provision by lotteries with nonlinear pricing," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 680-698.

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