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Groves mechanisms and communication externalities

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  • Efthymios Athanasiou
  • Santanu Dey
  • Giacomo Valletta

Abstract

We put forward a model of private goods with externalities. Agents derive benefit from communicating with each other. In order to communicate they need to operate on a common platform. Adopting new platforms is costly. We first provide an algorithm that determines the efficient outcome. Then we prove that no individually rational and feasible Groves mechanism exists. We provide sufficient conditions that determine when an individually rational Groves mechanism runs a deficit and we characterize the individually rational Groves mechanism that minimizes such deficit whenever it occurs. Moreover, for 2-agent economies, we single out the only feasible and symmetrical Groves mechanism that is not Pareto dominated by another strategy-proof, feasible and symmetrical mechanism. Copyright The Author(s) 2016

Suggested Citation

  • Efthymios Athanasiou & Santanu Dey & Giacomo Valletta, 2016. "Groves mechanisms and communication externalities," Review of Economic Design, Springer;Society for Economic Design, vol. 20(1), pages 1-37, March.
    • Handle: RePEc:spr:reecde:v:20:y:2016:i:1:p:1-37
    DOI: 10.1007/s10058-015-0180-y
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    References listed on IDEAS

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    Cited by:

    1. Efthymios Athanasiou & Juan D. Moreno-Ternero & Shlomo Weber, 2015. "Language learning and communicative benefits," Working Papers 15.09, Universidad Pablo de Olavide, Department of Economics.

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    More about this item

    Keywords

    Groves mechanisms; Externality; Budget surplus or deficit; Pareto undominated mechanisms; D70; D62; C60;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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