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Mechanism Design for the Environment

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  • Sandeep Baliga

    (Kellogg Graduate School of Management, Northwestern University)

  • Eric Maskin

    (School of Social Science, Institute for Advanced Study)

Abstract

We argue that when externalities such as pollution are nonexcludable, agents must be compelled to participate in a "mechanism" to ensure a Pareto-efficient outcome. We survey some of the main findings of the mechanism-design (implementation-theory) literature -- such as the Nash implementation theorem, the Gibbard-Satterthwaite theorem, the Vickrey-Clarke-Groves mechanism, and the Arrow/d'Aspremont-Gerard-Varet mechanism -- and consider their implications for the environment, in particular the reduction of aggregate emissions of pollution. We consider the cases of both complete and incomplete information.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sandeep Baliga & Eric Maskin, 2002. "Mechanism Design for the Environment," Economics Working Papers 0024, Institute for Advanced Study, School of Social Science.
    • Handle: RePEc:ads:wpaper:0024
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    References listed on IDEAS

    as
    1. Green, Jerry & Laffont, Jean-Jacques, 1977. "On the revelation of preferences for public goods," Journal of Public Economics, Elsevier, vol. 8(1), pages 79-93, August.
    2. Luis C. Corchón, 1996. "The Theory of Implementation of Socially Optimal Decisions in Economics," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37283-2, December.
    3. 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 427-438, March.
    4. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    5. Partha Dasgupta & Peter Hammond & Eric Maskin, 1980. "On Imperfect Information and Optimal Pollution Control," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 857-860.
    6. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
    7. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    8. E. Maskin, 1983. "The Theory of Implementation in Nash Equilibrium: A Survey," Working papers 333, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
    10. Maskin, Eric & Sjostrom, Tomas, 2002. "Implementation theory," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 5, pages 237-288, Elsevier.
    11. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    12. Maskin, Eric & Sjostrom, Tomas, 2002. "Implementation theory," Handbook of Social Choice and Welfare,in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 5, pages 237-288 Elsevier.
    13. Maskin, Eric S, 1994. "The Invisible Hand and Externalities," American Economic Review, American Economic Association, vol. 84(2), pages 333-337, May.
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    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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