Information Design for the Provision of Public Goods with Interdependent Preferences

University essay from Handelshögskolan i Stockholm/Institutionen för nationalekonomi

Abstract: This master's thesis uses an information design approach to improve contributions in a public goods game where players have interdependent preferences. The idea is that an information designer commits to a decision rule giving action recommendations such that players will contribute more often to a public good. The players are conditional cooperators in the sense that they want to contribute together with their own type and prefer not to collaborate with a different type. There is uncertainty about the type they are collaborating with. In a model that is based on Bergemann and Morris (2016a), we first characterize the set of attainable equilibria and then identify the best possible outcome for the information designer. We find that a designer can improve expected utility in a voluntary contribution mechanism by giving action recommendations that satisfy the players' incentive compatibility constraints. Furthermore, the information design problem is studied with other mechanisms, which gives the result that the designer's utility is highest in a mechanism with an entry fee when the public good is excludable.

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