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No Externalities: A Characterization of Efficiency and Incentive Compatibility with Public Goods

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  • Joseph M. Ostroy

    (UCLA)

  • Uzi Segal

    () (Boston College)

Abstract

We show that efficient anonymous incentive compatible (dominant strategy) mechanisms for public goods eliminate externalities, i.e., each individual is unable to change the welfare of anyone else. The characterization is used to derive existence and non-existence results for models with a finite number of individuals and to explain existence results in the continuum. A similar characterization and conclusions are demonstrated for private goods in [7]. However, unlike private goods, elimination of externalities with public goods implies that individuals cannot change the outcome. Hence, such mechanisms provide only weak incentives for truth-telling.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 769.

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Date of creation: 22 Sep 2010
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Handle: RePEc:boc:bocoec:769

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Keywords: Public goods; private goods; no externalities; incentive compatibility; duality;

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