DYNAMIC PUBLIC-GOODS PROVISION WITH COALITIONAL MANIPULATION

We study dynamic procedures for the provision of an efficient level of a public good with time-dependent surplus distribution. In general, such procedures are prone to manipulation via pre-play communication among coalitions of agents. We begin with a generalization of Truchon's (Econometrica, 1984, 52, 1179-1190) elegant non-myopic MDP procedure and provide a new procedure that exhibits finite, monotone convergence to Pareto-efficiency in Subgame-Perfect Coalition-proof equilibrium. This procedure also implements any 'regular' surplus distribution rule that is dependent on the public good level. The solution concept of Subgame-Perfect Coalition-proof equilibrium is also new. It is an extension of the semistability characterizations of Coalition-proof equilibrium for infinite-strategy games due to Kahn and Mookherjee (Games and Economic Behavior, 1992, 4, 101-121). The coalition-proofing device given is more generally applicable.