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Working Paper
Efficient Public Good Provision in Networks : Revisiting the Lindahl Solution
The provision of public goods in developing countries is a central challenge. This paper studies a model where each agent?s effort provides heterogeneous benefits to the others, inducing a network of opportunities for favor-trading. We focus on a classical efficient benchmark ? the Lindahl solution ? that can be derived from a bargaining game. Does the optimistic assumption that agents use an efficient mechanism (rather than succumbing to the tragedy of the commons) imply incentives for efficient investment in the technology that is used to produce the public goods? To show that the answer is ...
Working Paper
A Crises-Bailouts Game
This paper studies the optimal design of a liability-sharing arrangement as an infinitely repeated game. We construct a noncooperative model with two agents: one active and one passive. The active agent can take a costly and unobservable action to reduce the incidence of crisis, but a crisis is costly for both agents. When a crisis occurs, each agent decides unilaterally how much to contribute mitigating it. For the one-shot game, when the avoidance cost is too high relative to the expected loss of crisis for the active agent, the first-best is not achievable. That is, the active agent ...