A community of players is presented with a discrete public good project (i.e., it is either undertaken in full or not undertaken at all). It is provided only if the sum of voluntary contributions is sufficient to cover the cost.
Key Learning Objectives:
- Free-Rider Problem: Even if the societal benefit of a discrete public good exceeds its cost, relying on voluntary contributions may result in contributions insufficient to provide the good. The possibility that sufficient contributions will be collected (and therefore the good will be provided), even if the individual reduces or eliminates her contribution, provides an incentive to free ride.
- Collective Action Problem: The free-rider problem is expected to be more prevalent in larger groups.
- Main Courses: microeconomics; public policy; game theory; managerial economics
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