Sequential Provision of Public Goods

Abstract

I consider the private provision of public goods when agents are able to make sequential contributions rather than simultaneous contributions. In the case of two agents with quasilinear utility, a quite complete analysis is possible. If the agent who likes the public good least gets to move first, the amount of the public good supplied will be the same as in the Nash equilibrium, but if the agent who likes the public good most moves first, less of the public good may be supplied. If the agents bid for the right to move first, the agent who values the public good least will always outbid the other agent. In general, each agent would prefer to subsidize the other agent's contributions. If each agent chooses the rate at which they subsidize the other agent, the subsidizes that support the Lindahl allocation are the unique equilibrium subsidies. For general utility functions, I show that the subgame perfect quilibrium always results in less of the public good being supplied than does the Nash equilibrium.