Working Paper: NBER ID: w22772
Authors: T. Renee Bowen; George Georgiadis; Nicolas S. Lambert
Abstract: Two heterogeneous agents contribute over time to a joint project, and collectively decide its scope. A larger scope requires greater cumulative effort and delivers higher benefits upon completion. We show that the efficient agent prefers a smaller scope, and preferences are time-inconsistent: as the project progresses, the efficient (inefficient) agent’s preferred scope shrinks (expands). We characterize the equilibrium outcomes under dictatorship and unanimity, with and without commitment. We find that an agent’s degree of efficiency is a key determinant of control over project scopes. From a welfare perspective, it may be desirable to allocate decision rights to the inefficient agent.
Keywords: public goods; collective choice; dynamic decision-making
JEL Codes: C73; D70; D78; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| efficient agent (D61) | prefers smaller project scope (L25) |
| inefficient agent (D82) | prefers larger project scope (H43) |
| project nearing completion (Y60) | efficient agent's preferred scope decreases (D84) |
| project nearing completion (Y60) | inefficient agent's preferred scope increases (D82) |
| dictatorship with commitment (D70) | efficient agent's ideal project scope is implemented (L85) |
| dictatorship without commitment (D70) | inefficient agent's preferences dominate (D82) |
| efficient agent's higher effort levels (D29) | do not translate into higher discounted payoffs (G19) |