Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5072990 | Games and Economic Behavior | 2007 | 19 Pages |
Rarely, if ever, do parties contemplating a joint project commit resources without engaging in non-binding discussions about who does what. To examine the role of such discussions, we model the investment decision as a voluntary contribution game where each player is privately informed of her benefit from project's completion. Efficiency of every equilibrium of this game is improved when a prior stage of communication is allowed. Interestingly, this improvement can be achieved in “simple equilibria” where a player simply announces whether (not how much) she plans to contribute.With symmetric priors, the simple equilibrium that maximizes either utilitarian ex ante welfare or the probability of completion has a curiously egalitarian feature-whenever the project is completed, each party contributes exactly half the cost, independent of private information.