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Contests and the Private Production of Public Goods
Author(s) -
Kolmar Martin,
Wagener Andreas
Publication year - 2012
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/0038-4038-79.1.161
Subject(s) - contest , incentive , public good , production (economics) , competition (biology) , microeconomics , sorting , economics , value (mathematics) , private good , public economics , rent seeking , business , political science , ecology , programming language , machine learning , politics , computer science , law , biology
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.