Incomplete information and incentives to free ride

Abstract

We study private provision of a continuous public good in an incomplete information repeated game. The analysis generates the following predictions in the form of Perfect Bayesian equilibria. When the discount factor is low, the game played by increasingly optimistic players may collapse into a war of attrition: delay may occur and one player may bear the burden of providing the public good while the other free rides forever. On the other hand, if the discount factor is high, or low but prior beliefs are "pessimistic", the inclusion of incomplete information has no impact on the pattern of contributions. © Springer-Verlag 1996.