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Mechanism Design for the Environment

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  • Sandeep Baliga
  • Eric Maskin

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.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 506439000000000341.

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Date of creation: 20 Feb 2003
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Handle: RePEc:cla:levarc:506439000000000341

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References

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  1. Maskin, Eric S, 1994. "The Invisible Hand and Externalities," American Economic Review, American Economic Association, American Economic Association, vol. 84(2), pages 333-37, May.
  2. Dasgupta, Partha & Hammond, Peter & Maskin, Eric, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(5), pages 857-60, October.
  3. Maskin, Eric, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(1), pages 23-38, January.
  4. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, Econometric Society, vol. 41(4), pages 617-31, July.
  5. Maskin, Eric & Sjostrom, Tomas, 2001. "Implementation Theory," Working Papers, Pennsylvania State University, Department of Economics 5-01-1, Pennsylvania State University, Department of Economics.
  6. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, Econometric Society, vol. 45(2), pages 427-38, March.
  7. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, Elsevier, vol. 39(1), pages 14-33, June.
  8. E. Maskin, 1983. "The Theory of Implementation in Nash Equilibrium: A Survey," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 333, Massachusetts Institute of Technology (MIT), Department of Economics.
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Cited by:
  1. Matveenko, V., 2010. "Stimulating Mechanisms in Ecologically Motivated Regulation: Will Ecological Policies in Transition and Developing Countries Become Efficient?," Journal of the New Economic Association, New Economic Association, New Economic Association, issue 8, pages 10-34.
  2. Rodrigo Harrison & Roger Laguno ff, 2013. "Dynamic Mechanism Design for a Global Commons," Levine's Working Paper Archive 786969000000000831, David K. Levine.
  3. Martimort, David & Sand-Zantman, Wilfried, 2012. "Solving the GlobalWarming Problem: Beyond Markets, Simple Mechanisms May Help!," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 746, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Axel Ockenfels, 2009. "Marktdesign und Experimentelle Wirtschaftsforschung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 10(s1), pages 31-53, 05.
  5. Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2013. "Coarse Correlated Equilibria in an Abatement Game," Discussion Papers, Department of Economics, University of Birmingham 13-11, Department of Economics, University of Birmingham.
  6. Martimort, David & Sand-Zantman, Wilfried, 2011. "A Mechanism Design Approach to Climate Agreements," TSE Working Papers, Toulouse School of Economics (TSE) 11-251, Toulouse School of Economics (TSE), revised 30 Apr 2013.
  7. Jason Shogren & Gregory Parkhurst & Prasenjit Banerjee, 2010. "Two Cheers and a Qualm for Behavioral Environmental Economics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 46(2), pages 235-247, June.
  8. Eric S. Maskin, 2008. "Mechanism Design: How to Implement Social Goals," American Economic Review, American Economic Association, American Economic Association, vol. 98(3), pages 567-76, June.
  9. Carlos Chávez & John Stranlund, 2009. "A Note on Emissions Taxes and Incomplete Information," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 44(1), pages 137-144, September.
  10. Banerjee, Prasenjit & Shogren, Jason F., 2010. "Regulation, reputation, and environmental risk," Economics Letters, Elsevier, Elsevier, vol. 106(1), pages 45-47, January.
  11. Committee, Nobel Prize, 2007. "Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson: Mechanism Design Theory," Nobel Prize in Economics documents, Nobel Prize Committee 2007-2, Nobel Prize Committee.
  12. Denis Claude & Charles Figuières & Mabel Tidball, 2012. "Regulation of Investments in Infrastructure: The Interplay between Strategic Behaviors and Initial Endowments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(1), pages 35-66, 02.
  13. Banerjee, Prasenjit & Shogren, Jason F., 2012. "Material interests, moral reputation, and crowding out species protection on private land," Journal of Environmental Economics and Management, Elsevier, vol. 63(1), pages 137-149.
  14. Banerjee, Prasenjit & Shogren, Jason F., 2012. "Fat-tail Climate Risks, Mechanism design, and Reputation," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124920, Agricultural and Applied Economics Association.

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