Discrete public goods under threshold uncertainty

Threshold uncertainty in discrete public good games: an experimental study

“…I review only the pure equilibria here, as the mixed equilibria will exhibit qualitatively similar features (McBride 2006). An agent's decision in equilibrium will depend on her subjective probability of being pivotal in providing the public good.…”

“…They find that threshold uncertainty often results in inefficient equilibria because ex post excess contributions might be discarded or because contributions fall short of the threshold in equilibrium. 3 More recently, however, McBride (2006) showed that the effect of an increase of uncertainty (as in a mean-preserving spread) on binary contribution decisions depends on the value of the public good. For example, in the neighborhood resident example mentioned earlier, suppose it is known exactly how many residents must petition the government to get the project approved and that the equilibrium outcome under perfect knowledge of the petition threshold is that enough petitions be made.…”

“…These data allow a closer examination of the subjects' decision making process because they can be used to infer a measure of the subjects' perceived pivotalness. Thus, unlike other experimental work, the experiment performed here can test McBride's (2006) prediction about the binary contribution decision.…”

Changes in the Threshold Uncertainty in a Simultaneous Subscription Game

“…For example, it might not be known how much money will be needed to build a community library or to complete a public good project. Realizing that the threshold uncertainty may affect the player's strategic contribution behavior, Nitzan and Romano [3], Suleiman [4], and McBride [5] introduce threshold uncertainty into the discrete public good model. The first two papers find possibility of inefficient equilibrium under threshold uncertainty.…”

“…The reason that inefficiency may obtain is that the ex post contributions exceed the required threshold quantity of contribution or the contributions are insufficient to cover the required threshold level. McBride [5] investigates how the level of threshold uncertainty affects players' contributions and he finds that instead of having a monotonic relationship between the threshold uncertainty and the contributions, the effect of changing the threshold uncertainty on the contributions depends on public good valuations. An increase of the threshold uncertainty, in the sense of mean-preserving spread, increases the player's contribution when the value of the public good is sufficiently high; otherwise, it decreases the player's contribution when the value of the public good is sufficiently low.…”