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Sharing the cost of a public good: An incentive-constrained axiomatic approach

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  • Maniquet, François
  • Sprumont, Yves

Abstract

We study the problem of provision and cost-sharing of a public good in large economies where exclusion, complete or partial, is possible. We search for incentive-constrained efficient allocation rules that display fairness properties. Population monotonicity says that an increase in population should not be detrimental to anyone. Demand monotonicity states that an increase in the demand for the public good (in the sense of a first-order stochastic dominance shift in the distribution of preferences) should not be detrimental to any agent whose preferences remain unchanged. Under suitable domain restrictions, we give an explicit characterization of all incentive-constrained efficient allocation rules. We then show that there exists a unique incentive-constrained efficient and demand-monotonic allocation rule: the so-called serial rule. In the binary public good case, the serial rule is also the only incentive-constrained efficient and population-monotonic rule.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 68 (2010)
Issue (Month): 1 (January)
Pages: 275-302

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Handle: RePEc:eee:gamebe:v:68:y:2010:i:1:p:275-302

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Excludable public good Incentive compatibility Fairness Serial rule;

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References

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  1. Fleurbaey,Marc & Maniquet,Fran‡ois, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521887427.
  2. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  3. Crawford, Vincent P, 1979. "A Procedure for Generating Pareto-Efficient Egalitarian-Equivalent Allocations," Econometrica, Econometric Society, vol. 47(1), pages 49-60, January.
  4. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
  5. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1163-1188, October.
  6. François Maniquet, 2003. "Implementation of allocation rules under perfect information," Social Choice and Welfare, Springer, vol. 21(2), pages 323-346, October.
  7. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  8. Kaneko, Mamoru, 1977. "The Ratio Equilibria and the Core of the Voting Game G(N, W) in a Public Goods Economy," Econometrica, Econometric Society, vol. 45(7), pages 1589-94, October.
  9. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  10. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March.
  11. Olszewski, Wojciech, 2004. "Coalition strategy-proof mechanisms for provision of excludable public goods," Games and Economic Behavior, Elsevier, vol. 46(1), pages 88-114, January.
  12. Yves Sprumont, 1998. "Equal factor equivalence in economies with multiple public goods," Social Choice and Welfare, Springer, vol. 15(4), pages 543-558.
  13. Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  14. Francois Maniquet & Yves Sprumont, 2002. "Welfare Egalitarianism in Non-Rival Environments," Economics Working Papers 0016, Institute for Advanced Study, School of Social Science.
  15. Francois Maniquet & Yves Sprumont, 2002. "Fair Production and Allocation of an Excludable Nonrival Good," Economics Working Papers 0014, Institute for Advanced Study, School of Social Science.
  16. James A. Dearden, 1998. "Serial cost sharing of excludable public goods: general cost functions," Economic Theory, Springer, vol. 12(1), pages 189-198.
  17. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 625-41, June.
  18. repec:mtl:montec:04-2002 is not listed on IDEAS
  19. Demange, Gabrielle, 1984. "Implementing Efficient Egalitarian Equivalent Allocations," Econometrica, Econometric Society, vol. 52(5), pages 1167-77, September.
  20. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  21. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 217-25, April.
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Citations

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Cited by:
  1. Ana, MAULEON & Vincent, VANNETELBOSCH, 2005. "Market Integration and Strike Activity," Discussion Papers (ECON - Département des Sciences Economiques) 2005025, Université catholique de Louvain, Département des Sciences Economiques.
  2. Juan D. Moreno-Ternero & John E. Roemer, 2011. "A common ground for resource and welfare egalitarianism," Working Papers 11.12, Universidad Pablo de Olavide, Department of Economics.
  3. MAULEON, Ana & SONG, Huasheng & VANNETELBOSCH, Vincent, 2006. "Networks of free trade agreements among heterogeneous countries," CORE Discussion Papers 2006053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Thisse, Jacques-François, 2010. "Toward a unified theory of economic geography an urban economics," Open Access publications from Université catholique de Louvain info:hdl:2078.1/30406, Université catholique de Louvain.
  5. Geoffroy de Clippel, 2010. "Copmment on Egalitarianism under Incomplete Information," Working Papers 2010-4, Brown University, Department of Economics.

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