Editing Free-rider problem (section)

=== Assurance contracts ===
{{Main|Assurance contract}}

An assurance contract is a contract in which participants make a binding pledge to contribute to building a public good, contingent on a quorum of a predetermined size being reached, otherwise the good is not provided and any monetary contributions are refunded.<ref name="Provision of Public Goods">{{cite web |last1=Bagnoli |first1=Mark |last2=Lipman |first2=Barton L. |title=Provision of Public Goods: Fully Implementing the Core through Private Contributions |url=http://restud.oxfordjournals.org/content/56/4/583.short |website=Oxford Journals |publisher=[[The Review of Economic Studies]] |archive-date=2014-03-05|archive-url=https://web.archive.org/web/20140305084738/http://restud.oxfordjournals.org/content/56/4/583.short}}</ref>

A [[dominant assurance contract]] is a variation in which an entrepreneur creates the contract and refunds the initial pledge plus an additional sum of money if the quorum is not reached. The entrepreneur profits by collecting a fee if the quorum is reached and the good is provided. In terms of [[game theory]], this makes pledging to build the public good a dominant strategy: the best move is to abide by the contract regardless of the actions of others.<ref>{{Cite web |url=http://mason.gmu.edu/~atabarro/PrivateProvision.pdf |title=The private provision of public goods via dominant assurance |access-date=16 October 2013 |archive-url=https://web.archive.org/web/20130112223855/http://mason.gmu.edu/~atabarro/PrivateProvision.pdf |archive-date=12 January 2013 |url-status=live |df=dmy-all }}</ref>