Accepted Paper: Split it up to Create Incentives: Investment, Public Goods and Crossing the River

09.07.2020

VGSE graduate Simon Martin and VGSE faculty member Karl Schlag's paper accepted for publication in the Journal of Economic Theory.

The research that led to this publication was carried out at VGSE. The article is based on a chapter of Simon's dissertation, which he defended in June 2019.

Simon Martin joined the Düsseldorf Institute for Competition Economics (DICE) at the Heinrich Heine Universität Düsseldorf in October 2019.

Abstract: When should one pay the ferryman? When to pay for the delivery of a good, and how should one invest in a public good if there is a single transaction and institutions are costly? We show how to solve the hold-up problem. The idea is to appropriately split up the desired total contribution into several separate contributions that are made in sequence, with each party threatening to discontinue if others deviate. Our solution concept is based on subgame perfection, where players are either selfish and do not care about very small gains or are socially minded as long as there is no deviation. 

Simon Martin
Simon Martin