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Sharing the cost of a public good: An incentive-constrained axiomatic approach

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  • MANIQUET, François
  • SPRUMONT, Yves

Abstract

We study the problem of provision and cost-sharing of a public good in large economies where exclusion, complete or partial, is possible. We search for incentive-constrained efficient allocation rules that display fairness properties. Population monotonicity says that an increase in population should not be detrimental to anyone. Demand monotonicity states that an increase in the demand for the public good (in the sense of a first-order stochastic dominance shift in the distribution of preferences) should not be detrimental to any agent whose preferences remain unchanged. Under suitable domain restrictions, there exists a unique incentive-constrained efficient and demand-monotonic allocation rule: the so-called serial rule. In the binary public good case, the serial rule is also the only incentive-constrained efficient and population-monotonic rule.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2184.

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Handle: RePEc:cor:louvrp:-2184

Note: In : Games and Economic Behavior, 68, 275-302, 2010
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  1. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
  2. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  3. Demange, Gabrielle, 1984. "Implementing Efficient Egalitarian Equivalent Allocations," Econometrica, Econometric Society, vol. 52(5), pages 1167-77, September.
  4. Sprumont, Y., 1996. "Equal Factor Equivalence in Economies with Multiple Public Goods," Cahiers de recherche 9627, Universite de Montreal, Departement de sciences economiques.
  5. Norman,P., 2000. "Efficient mechanisms for public goods with use exclusions," Working papers 15, Wisconsin Madison - Social Systems.
  6. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 625-41, June.
  7. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  8. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, October.
  9. MANIQUET, François & SPRUMONT, Yves, . "Welfare egalitarianism in non-rival environments," CORE Discussion Papers RP -1826, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  11. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  12. Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  13. Francois Maniquet & Yves Sprumont, 2002. "Fair Production and Allocation of an Excludable Nonrival Good," Economics Working Papers 0014, Institute for Advanced Study, School of Social Science.
  14. Crawford, Vincent P, 1979. "A Procedure for Generating Pareto-Efficient Egalitarian-Equivalent Allocations," Econometrica, Econometric Society, vol. 47(1), pages 49-60, January.
  15. François Maniquet, 2003. "Implementation of allocation rules under perfect information," Social Choice and Welfare, Springer, vol. 21(2), pages 323-346, October.
  16. Mutuswami, Suresh, 2004. "Strategyproof cost sharing of a binary good and the egalitarian solution," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 271-280, November.
  17. 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 427-38, March.
  18. James A. Dearden, 1998. "Serial cost sharing of excludable public goods: general cost functions," Economic Theory, Springer, vol. 12(1), pages 189-198.
  19. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 217-25, April.
  20. Olszewski, Wojciech, 2004. "Coalition strategy-proof mechanisms for provision of excludable public goods," Games and Economic Behavior, Elsevier, vol. 46(1), pages 88-114, January.
  21. Kaneko, Mamoru, 1977. "The Ratio Equilibria and the Core of the Voting Game G(N, W) in a Public Goods Economy," Econometrica, Econometric Society, vol. 45(7), pages 1589-94, October.
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Cited by:
  1. MORENO-TERNERO, Juan D. & ROEMER, John E., 2008. "Axiomatic resource allocation for heterogeneous agents," CORE Discussion Papers 2008018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. MORENO-TERNERO, Juan D. & ROEMER, John E., . "A common ground for resource and welfare egalitarianism," CORE Discussion Papers RP -2400, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Athanasiou, Efthymios, 2013. "A Solomonic solution to the problem of assigning a private indivisible good," Games and Economic Behavior, Elsevier, vol. 82(C), pages 369-387.
  4. Geoffroy de Clippel, 2010. "Copmment on Egalitarianism under Incomplete Information," Working Papers 2010-4, Brown University, Department of Economics.

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