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Lotteries and Lindahl prices in public good provision
Author(s) -
Franke Jörg,
Leininger Wolfgang
Publication year - 2018
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12307
Subject(s) - lottery , contest , economics , nash equilibrium , microeconomics , public good , mathematical economics , law , political science
Lotteries are traditional instruments for fundraising in general. Morgan has shown that they can also be very effective in the provision of a public good. However, a fair lottery can only enhance provision but never result in the efficient amount. Franke and Leininger show how—by borrowing from optimal contest theory— biased lotteries can provide the efficient amount of the public good. This paper aligns this result with standard public good theory, in particular the classic notion of Lindahl pricing. It shows that biased lotteries can—implicitly—implement Lindahl pricing of the public good in noncooperative Nash equilibrium.