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Implementing Lindahl allocations in a warm-glow economy

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  • Carvajal, Andrés
  • Song, Xinxi

Abstract

We provide a mechanism, the Nash equilibria of which coincide with the Lindahl allocations with two personalized prices in an economy that may display warm-glow preferences. The traditional techniques in implementing Lindahl allocations crucially depend on one Lindahl price for each consumer. The novel contribution of our mechanism is that it offers a construction of two personalized prices for each consumer, their individual contributions and the corresponding tax rules that align consumers’ incentives to restore efficiency. Our construction has potential applications to efficient provision of public goods in networks, which would require multiple Lindahl prices.

Suggested Citation

  • Carvajal, Andrés & Song, Xinxi, 2022. "Implementing Lindahl allocations in a warm-glow economy," Economics Letters, Elsevier, vol. 217(C).
    • Handle: RePEc:eee:ecolet:v:217:y:2022:i:c:s0165176522001999
    DOI: 10.1016/j.econlet.2022.110630
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    More about this item

    Keywords

    Public goods; Warm-glow; Lindahl allocations; Nash equilibria;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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