Collective Choice in Dynamic Public Good Provision

Collective Choice in Dynamic Public Good Provision

By
Renee Bowen, George Georgiadis, Nicolas S. Lambert
American Economic Journal: Microeconomics. February
2019, Vol. 11, Issue 1, Pages 243-298

Two heterogeneous agents contribute over time to a joint project and collectively decide its scale. A larger scale requires greater cumulative effort and delivers higher benefits upon completion. We show that the efficient agent prefers a smaller scale, and preferences are time-inconsistent: as the project progresses, the efficient (inefficient) agent’s preferred scale 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 the project scale. From a welfare perspective, it may be desirable to allocate decision rights to the inefficient agent.