Public good agreements under the weakest-link technology

Alejandro Caparrós, Michael Finus

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

We analyze the formation of public good agreements under the weakest-link technology. Whereas policy coordination is not necessary for symmetric players, it matters for asymmetric players; however, this fails in the absence of transfers. By contrast, with a transfer scheme, asymmetry may be an asset for cooperation. We characterize various types and degrees of asymmetry and relate them to the stability of self-enforcing agreements. Asymmetric distributions of autarky public good provision levels (also representing asymmetric interests in cooperation) that are positively skewed tend to be conducive to the stability of agreements. We show that under such conditions, even a coalition including all players can be stable. However, asymmetries that foster stability (instability) tend to be associated with low (high) gains from cooperation.

Original languageEnglish
JournalJournal of Public Economic Theory
Early online date11 Feb 2020
DOIs
Publication statusE-pub ahead of print - 11 Feb 2020

Keywords

  • agreement formation
  • public goods
  • weakest-link technology

ASJC Scopus subject areas

  • Finance
  • Sociology and Political Science
  • Economics and Econometrics

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