Optimal mechanism design for the private supply of a public good
AbstractWe study the problem of finding the profit-maximizing mechanism for a monopolistic provider of a single, non-excludable public good. Our model covers the most general setting, namely, we allow for correlation in the signal distribution as well as for informational externalities in the valuations. We show that the optimal deterministic, ex-post incentive compatible, ex-post individual rational mechanism can be computed in polynomial time by reducing the problem to finding a maximal weight closure in a directed graph. Node weights in the graph correspond to conditional virtual values, while the network structure is arising from the monotonicity constraints. We discuss what can be achieved if we relax our core assumptions one by one, i.e., if we go for randomized, interim individual rational or Bayes–Nash implementable mechanisms. Finally, we demonstrate that our techniques can be adapted for the excludable public good problem as well.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 80 (2013)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622836
Public good provision; Mechanism design; Profit maximization;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schmitz, Patrick W., 1997.
"Monopolistic Provision of Excludable Public Goods under Private Information,"
6549, University Library of Munich, Germany.
- Schmitz, Patrick W, 1997. "Monopolistic Provision of Excludable Public Goods under Private Information," Public Finance = Finances publiques, , vol. 52(1), pages 89-101.
- Jean-Claude Picard, 1976. "Maximal Closure of a Graph and Applications to Combinatorial Problems," Management Science, INFORMS, vol. 22(11), pages 1268-1272, July.
- Alex Gershkov & Jacob K. Goeree & Alexey Kushnir & Benny Moldovanu & Xianwen Shi, 2013.
"On the Equivalence of Bayesian and Dominant Strategy Implementation,"
Econometric Society, vol. 81(1), pages 197-220, 01.
- Alex Gershkov & Jacob Goeree & Alexey Kushnir & Benny Moldovanu & Xianwen Shi, 2012. "On the Equivalence of Bayesian and Dominant Strategy Implementation," Working Papers tecipa-445, University of Toronto, Department of Economics.
- Laffont, Jean-Jacques & Martimort, David, 1998.
"Mechanism Design with Collusion and Correlation,"
IDEI Working Papers
81, Institut d'Économie Industrielle (IDEI), Toulouse.
- Robert B. Wilson, 1967. "Competitive Bidding with Asymmetric Information," Management Science, INFORMS, vol. 13(11), pages 816-820, July.
- Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2011. "Bayesian and Dominant Strategy Implementation Revisited," Working Papers tecipa-422, University of Toronto, Department of Economics.
- Werner Güth & Martin Hellwig, 1986.
"The private supply of a public good,"
Journal of Economics,
Springer, vol. 5(1), pages 121-159, December.
- Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
- Jeffrey C. Ely & Kim-Sau Chung, 2002. "Ex-Post Incentive Compatible Mechanism Design," Discussion Papers 1339, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Alejandro M. Manelli & Daniel R. Vincent, 2010. "Bayesian and Dominant‐Strategy Implementation in the Independent Private‐Values Model," Econometrica, Econometric Society, vol. 78(6), pages 1905-1938, November.
- Milgrom, Paul R & Weber, Robert J, 1982.
"A Theory of Auctions and Competitive Bidding,"
Econometric Society, vol. 50(5), pages 1089-1122, September.
- Fernando Branco, 1996. "Multiple unit auctions of an indivisible good," Economic Theory, Springer, vol. 8(1), pages 77-101.
- McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
- Philippe Jehiel & Moritz Meyer-ter-Vehn & Benny Moldovanu & William R. Zame, 2005.
"The Limits of Ex-Post Implementation,"
666156000000000548, UCLA Department of Economics.
- Bruce Faaland & Kiseog Kim & Tom Schmitt, 1990. "A New Algorithm for Computing the Maximal Closure of a Graph," Management Science, INFORMS, vol. 36(3), pages 315-331, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.