The private provision of public goods via dominant assurance contracts

Abstract

Many types of public goods can be produced privately by profit seeking entrepreneurs using a modified form of assurance contract, called a dominant assurance contract. I model the dominant assurance contract as a game and show that the pure strategy equilibrium has agents contributing to the public good as a dominant strategy. The game is also modelled under incomplete information as a Bayesian-Nash game.

This is a preview of subscription content, access via your institution.

References

  1. Bagnoli, M. and Lipman, B.L. 1988. Successful takeovers without exclusion. Review of Financial Studies 1(1): 89–110.

    Google Scholar 

  2. Bagnoli, M. and Lipman, B.L. 1989. Provision of public goods: Fully implementing the core through private contributions. Review of Economic Studies 56: 583–601.

    Google Scholar 

  3. Brubaker, E.R. 1975. Free ride, free revelation, or golden rule? Journal of Law and Economics 18: 147–161 (reprinted in Cowen (1988).

    Google Scholar 

  4. Cowen, T. (Ed.), 1988. The theory of market failure. Fairfax, VA: George Mason University Press.

    Google Scholar 

  5. Demsetz, H. 1968. Why regulate utilities? Journal of Law and Economics 11: 55–65.

    Google Scholar 

  6. Diamond, D. and Dybvig, P. 1983. Bank runs, deposit insurance, and liquidity. Journal of Political Economy 91: 401–419.

    Google Scholar 

  7. Gradstein, M. and Nitzan, S. 1990. Binary participation and incremental provision of public goods. Social Choice and Welfare 7: 171–192.

    Google Scholar 

  8. Holmstrom, B. and Nalebuff, B. 1992. To the raider goes the surplus? Journal of Economics and Management Strategy 1(1): 37–62.

    Google Scholar 

  9. Kreps, D. 1990. A course in microeconomic theory, 704–713. Princeton: Princeton University Press.

    Google Scholar 

  10. Nitzan, S. and Romano, R.E. 1990. Private provision of a discrete public good with uncertain cost. Journal of Public Economics 42: 357–370.

    Google Scholar 

  11. Palfrey, T.R. and Rosenthal, H. 1984. Participation and the provision of discrete public good: A strategic analysis. Journal of Public Economics 24: 171–193.

    Google Scholar 

  12. Samuelson, P.A. 1954. The pure theory of public expenditure. Review of Economics and Statistics 36(November): 387–389.

    Google Scholar 

  13. Samuelson, P.A. 1955. Diagrammatic exposition of a theory of public expenditure. Review of Economics and Statistics 37(November): 350–356.

    Google Scholar 

  14. Schmidtz, D. 1991. The limits of government. Boulder, Col.: Westview Press.

    Google Scholar 

  15. Sen, A.K. 1967. Isolation, assurance and the social rate of discount. Quarterly Journal of Economics 81: 112–124.

    Google Scholar 

Download references

Author information

Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Tabarrok, A. The private provision of public goods via dominant assurance contracts. Public Choice 96, 345–362 (1998). https://doi.org/10.1023/A:1004957109535

Download citation

Keywords

  • Public Good
  • Public Finance
  • Modify Form
  • Incomplete Information
  • Pure Strategy