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Efficient provision of public goods with endogenous redistribution

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  • Luca Anderlini

    ()

  • Paolo Siconolfi

    ()

Abstract

We study a balanced mechanism that is capable of implementing in Nash equilibrium all the Pareto-efficient individually rational allocations for an economy with public goods. The Government chooses a set of weights directly related to the Lindahl prices corresponding to the Pareto-efficient allocation to be implemented. The mechanism then guarantees that initial endowments are re-allocated so that the chosen vector of Lindahl prices is indeed a Lindahl equilibrium, and implements the corresponding Lindahl allocation. Finally, besides being balanced, our mechanism is ‘simple’. Each agent has to declare a desired increase in the amount of public good, and a vector of redistributive transfers of initial endowments (across other agents). Copyright Springer-Verlag Berlin/Heidelberg 2004

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File URL: http://hdl.handle.net/10.1007/s10058-004-0113-7
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Bibliographic Info

Article provided by Springer in its journal Review Economic Design.

Volume (Year): 8 (2004)
Issue (Month): 4 (04)
Pages: 413-447

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Handle: RePEc:spr:reecde:v:8:y:2004:i:4:p:413-447

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Related research

Keywords: Optimal provision of public goods; endogenous redistribution; Nash implementation;

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References

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  1. Groves, Theodore & Ledyard, John O., 1978. "The Existence of Efficient and Incentive Compatible Equilibria with Public Goods," Working Papers 203, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Hurwicz, Leonid, 1979. "On allocations attainable through Nash equilibria," Journal of Economic Theory, Elsevier, vol. 21(1), pages 140-165, August.
  3. Tian, Guoqiang, 1988. "On the constrained Walrasian and Lindahl correspondences," Economics Letters, Elsevier, vol. 26(4), pages 299-303.
  4. Postlewaite, Andrew & Wettstein, David, 1989. "Feasible and Continuous Implementation," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 603-11, October.
  5. Laffont, Jean-Jacques & Maskin, Eric, 1980. "A Differential Approach to Dominant Strategy Mechanisms," Econometrica, Econometric Society, vol. 48(6), pages 1507-20, September.
  6. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Tian, Guoqiang, 2009. "Implementation of Pareto efficient allocations," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 113-123, January.
  2. Guoqiang Tian, 2010. "Implementation of marginal cost pricing equilibrium allocations with transfers in economies with increasing returns to scale," Review of Economic Design, Springer, vol. 14(1), pages 163-184, March.

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