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A Solution to the Problem of Externalities When Agents Are Well-Informed

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Author Info
Varian, Hal R

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Abstract

The author describes a class of simple two-stage mechanisms that implement efficient allocations as subgame-perfect equilibria for economic environments involving externalities. These mechanisms, known as compensation mechanisms, solve a wide variety of externalities problems, including implementation of Lindahl allocations, regulation of monopoly, and efficient solutions to the prisoner's dilemma. Copyright 1994 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 84 (1994)
Issue (Month): 5 (December)
Pages: 1278-93
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Handle: RePEc:aea:aecrev:v:84:y:1994:i:5:p:1278-93

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  1. Bagnoli, Mark & Lipman, Barton L, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," Review of Economic Studies, Blackwell Publishing, vol. 56(4), pages 583-601, October. [Downloadable!] (restricted)
  2. repec:att:wimass:19199918 is not listed on IDEAS
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  1. Breitscheidel, Jörg, 2005. "Self-financing Tax/Subsidy Mechanisms in Environmental Regulation with Many Firms," ZEW Discussion Papers 05-87, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Yasuyo Hamaguchi & Satoshi Mitani & Tatsuyoshi Saijo, 2004. "Does the Varian Mechanism Work? -Emissions Trading as an Example," Discussion papers 04009, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  3. Hikaru Ogawa & David Wildasin, 2007. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," Working Papers 2007-06, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
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  4. Casella, Alessandra, 2001. "Market Mechanisms for Policy Decisions," CEPR Discussion Papers 2667, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Roland Kirstein, . "Anti-Teilen in Teams," German Working Papers in Law and Economics 2005-1-1127, Berkeley Electronic Press. [Downloadable!]
  6. Katinka Pantzy & Anthony Ziegelmeyer, 2006. "Cooperative Networks: Theory and Experimental Evidence," Discussion Papers on Strategic Interaction 2005-32, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  7. Ju, Yuan & Borm, Peter, 2005. "Externalities and compensation: primeval games and solutions," Discussion Paper 71, Tilburg University, Center for Economic Research. [Downloadable!]
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  8. Ju, Yuan & Borm, Peter, 2006. "A non-cooperative approach to the compensation rules for primeval games," Discussion Paper 97, Tilburg University, Center for Economic Research. [Downloadable!]
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  9. Akira Yamada & Naoki Yoshihara, 2006. "Triple Implementation by Sharing Mechanisms in Production Economies with Unequal Labor Skill," Discussion Paper Series a475, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  10. Joanne Roberts, 1999. "Implementing the Efficient Allocation of Pollution," Working Papers jorob-99-01, University of Toronto, Department of Economics. [Downloadable!]
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  11. Juergen Bracht & Charles Figuieres & Marisa Ratto, 2004. "Relative performance of two simple incentive mechanisms in a public good experiment," The Centre for Market and Public Organisation 04/102, Department of Economics, University of Bristol, UK. [Downloadable!]
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  12. Roberts Waddle, 2005. "Strategic Profit Sharing Between Firms: A Primer," Economics Working Papers we050801, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  13. Casella, Alessandra, 2000. "Games for Central Bankers: Markets vs. Politics in Public Policy Decisions," CEPR Discussion Papers 2496, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Juan-Pablo Montero, 2006. "A simple auction mechanism for the optimal allocation of the commons," Working Papers 0608, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
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  15. Robin Boadway & Zhen Song & Jean-Francois Tremblay, 2006. "Commitment and Matching Contributions to Public Goods," Working Papers 1067, Queen's University, Department of Economics. [Downloadable!]
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  16. Jacques H. DREZE & Charles FIGUIERES & Jean, HINDRIKS, 2006. "Vountary matching grants can forestall social dumping," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2006063, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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  17. Roland Kirstein & Robert Cooter, . "Anti-Sharing," German Working Papers in Law and Economics 2005-1-1131, Berkeley Electronic Press. [Downloadable!]
  18. Mehmet Bac & Parimal Kanti Bag, 2000. "Strategic Information Revelation in Fund-Raising Campaigns," Econometric Society World Congress 2000 Contributed Papers 0178, Econometric Society. [Downloadable!]
  19. Joerg Breitscheidel & Hans Gersbach, 2005. "Self-Financing Environmental Mechanisms," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  20. Yan Chen & Robert Gazzale, 2004. "When Does Learning in Games Generate Convergence to Nash Equilibria? The Role of Supermodularity in an Experimental Setting," American Economic Review, American Economic Association, vol. 94(5), pages 1505-1535, December. [Downloadable!] (restricted)
  21. Cheng-Zhong Qin, 2005. "Penalties and Rewards As Inducements To Cooperate," University of California at Santa Barbara, Economics Working Paper Series 13-02R, Department of Economics, UC Santa Barbara. [Downloadable!]
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