IDEAS home Printed from https://ideas.repec.org/p/ash/wpaper/76.html
   My bibliography  Save this paper

A Large Population Approach to Implementing Efficiency with Minimum Inequality

Author

Listed:
  • Sarvesh Bandhu

    (Indian Institute of Management, Bangalore)

  • Ratul Lahkar

    (Ashoka University)

Abstract

We consider the implementation of efficiency with minimum inequality in a large population model of negative externalities. Formally, the model is one of tragedy of the commons with the aggregate strategy at the efficient state being lower than at the Nash equilibrium. A planner can restore efficiency by imposing an externality equivalent tax and then redistribute the tax revenue as transfers to lower inequality. We characterize the transfer vector that minimizes inequality at the efficient state subject to incentive compatibility and budget balance. We then construct a mechanism that implements efficiency with minimum inequality in dominant strategies. We also show that minimizing inequality at the efficient state maximizes the minimum payoff at efficiency. But it is not equivalent to implementing the Rawlsian social choice function.

Suggested Citation

  • Sarvesh Bandhu & Ratul Lahkar, 2022. "A Large Population Approach to Implementing Efficiency with Minimum Inequality," Working Papers 76, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:76
    as

    Download full text from publisher

    File URL: https://dp.ashoka.edu.in/ash/wpaper/paper76_0.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sprumont, Yves, 2013. "Constrained-optimal strategy-proof assignment: Beyond the Groves mechanisms," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1102-1121.
    2. Sandholm, William H., 2007. "Pigouvian pricing and stochastic evolutionary implementation," Journal of Economic Theory, Elsevier, vol. 132(1), pages 367-382, January.
    3. Sandholm, William H., 2001. "Potential Games with Continuous Player Sets," Journal of Economic Theory, Elsevier, vol. 97(1), pages 81-108, March.
    4. Shinji Ohseto, 2006. "Characterizations of strategy-proof and fair mechanisms for allocating indivisible goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 111-121, September.
    5. Lahkar, Ratul & Mukherjee, Saptarshi, 2021. "Evolutionary implementation in aggregative games," Mathematical Social Sciences, Elsevier, vol. 109(C), pages 137-151.
    6. Lahkar, Ratul & Mukherjee, Saptarshi, 2020. "Dominant strategy implementation in a large population public goods game," Economics Letters, Elsevier, vol. 197(C).
    7. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer.
    8. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 885-915.
    9. Anindya S. Chakrabarti & Ratul Lahkar, 2018. "An Evolutionary Analysis of Growth and Fluctuations with Negative Externalities," Dynamic Games and Applications, Springer, vol. 8(4), pages 733-760, December.
    10. William H. Sandholm, 2002. "Evolutionary Implementation and Congestion Pricing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 667-689.
    11. Matthew Elliott & Benjamin Golub & Matthew O. Jackson, 2014. "Financial Networks and Contagion," American Economic Review, American Economic Association, vol. 104(10), pages 3115-3153, October.
    12. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    13. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    14. Lahkar, Ratul & Mukherjee, Saptarshi, 2019. "Evolutionary implementation in a public goods game," Journal of Economic Theory, Elsevier, vol. 181(C), pages 423-460.
    15. Michael J. Smith, 1984. "The Stability of a Dynamic Model of Traffic Assignment---An Application of a Method of Lyapunov," Transportation Science, INFORMS, vol. 18(3), pages 245-252, August.
    16. Lahkar, Ratul, 2019. "Elimination of non-individualistic preferences in large population aggregative games," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 150-165.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sarvesh Bandhu & Ratul Lahkar, 2023. "Evolutionary robustness of dominant strategy implementation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(2), pages 685-721, August.
    2. Sarvesh Bandhu & Ratul Lahkar, 2021. "Implementation in Large Population Games with Multiple Equilibria," Working Papers 62, Ashoka University, Department of Economics.
    3. Ratul Lahkar & Vinay Ramani, 2021. "An Evolutionary Approach to Pollution Control in Competitive Markets," Working Papers 68, Ashoka University, Department of Economics.
    4. Ratul Lahkar & Vinay Ramani, 2022. "An Evolutionary Approach to Pollution Control in Competitive Markets," Dynamic Games and Applications, Springer, vol. 12(3), pages 872-896, September.
    5. Lahkar, Ratul & Mukherjee, Saptarshi, 2021. "Evolutionary implementation in aggregative games," Mathematical Social Sciences, Elsevier, vol. 109(C), pages 137-151.
    6. Sawa, Ryoji & Wu, Jiabin, 2023. "Statistical inference in evolutionary dynamics," Games and Economic Behavior, Elsevier, vol. 137(C), pages 294-316.
    7. Lahkar, Ratul & Mukherjee, Saptarshi, 2019. "Evolutionary implementation in a public goods game," Journal of Economic Theory, Elsevier, vol. 181(C), pages 423-460.
    8. Sandholm, William H., 2007. "Pigouvian pricing and stochastic evolutionary implementation," Journal of Economic Theory, Elsevier, vol. 132(1), pages 367-382, January.
    9. Sandholm, William H., 2015. "Population Games and Deterministic Evolutionary Dynamics," Handbook of Game Theory with Economic Applications,, Elsevier.
    10. Wada, Kentaro & Akamatsu, Takashi, 2013. "A hybrid implementation mechanism of tradable network permits system which obviates path enumeration: An auction mechanism with day-to-day capacity control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 60(C), pages 94-112.
    11. Luis C. Corchón, 2021. "Aggregative games," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 49-71, March.
    12. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 885-915.
    13. Miki Kato & Shinji Ohseto & Shohei Tamura, 2015. "Strategy-proofness versus symmetry in economies with an indivisible good and money," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(1), pages 195-207, February.
    14. Paula Jaramillo & Çaǧatay Kayı & Flip Klijn, 2014. "Asymmetrically fair rules for an indivisible good problem with a budget constraint," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(3), pages 603-633, October.
    15. Alva, Samson & Manjunath, Vikram, 2019. "Strategy-proof Pareto-improvement," Journal of Economic Theory, Elsevier, vol. 181(C), pages 121-142.
    16. Shinji Ohseto, 2021. "Strategy-proof and Pareto efficient allocation of indivisible goods: general impossibility domains," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(2), pages 419-432, June.
    17. Fujishima, Shota, 2013. "Evolutionary implementation of optimal city size distributions," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 404-410.
    18. Bandhu, Sarvesh & Lahkar, Ratul, 2023. "Survival of altruistic preferences in a large population public goods game," Economics Letters, Elsevier, vol. 226(C).
    19. Sandholm, William H., 2010. "Decompositions and potentials for normal form games," Games and Economic Behavior, Elsevier, vol. 70(2), pages 446-456, November.
    20. Tommy Andersson & Lars Ehlers & Lars-Gunnar Svensson & Ryan Tierney, 2022. "Gale’s Fixed Tax for Exchanging Houses," Mathematics of Operations Research, INFORMS, vol. 47(4), pages 3110-3128, November.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ash:wpaper:76. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ashoka University (email available below). General contact details of provider: https://www.ashoka.edu.in .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.