Working and shirking: Equilibrium in public-goods games with overlapping generations of players

Eric S. Dickson, Kenneth A. Shepsle

    Research output: Contribution to journalReview articlepeer-review

    Abstract

    In overlapping-generations models of public-goods provision, in which the contribution decision is binary and lifetimes are finite, the set of symmetric subgame-perfect equilibria can be categorized into three types: seniority equilibria, in which players contribute (effort) until a predetermined age and then shirk thereafter; dependency equilibria, in which players initially shirk, then contribute for a set number of periods, then shirk for the remainder of their lives; and sabbatical equilibria, in which players alternately contribute and shirk for periods of varying length before entering a final stage of shirking. In a world without discounting we establish conditions for equilibrium and demonstrate that for any dependency equilibrium there is a seniority equilibrium that Pareto dominates it ex ante. We proceed to characterize generational preferences over alternative seniority equilibria. We explore the aggregation of these preferences by embedding the public-goods provision game in a voting framework and solving for the majority-rule equilibria. In this way we can think of political processes as providing one natural framework for equilibrium selection in the original public-goods provision game.

    Original languageEnglish (US)
    Pages (from-to)285-318
    Number of pages34
    JournalJournal of Law, Economics, and Organization
    Volume17
    Issue number2
    DOIs
    StatePublished - Oct 2001

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Organizational Behavior and Human Resource Management
    • Law

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