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A Simple Supermodular Mechanism that Implements Lindahl Allocations

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Author Info
Van Essen, Matthew J.

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Abstract

This paper introduces a new incentive compatible mechanism which for general preference environments implements Lindahl allocations as Nash equilibria. The mechanism does not increase in structural complexity as consumers are added to the economy, the minimum dimension of data needed to compute payoffs is smaller than other mechanisms with comparable properties; and for quasi-linear environments, the mechanism induces a supermodular game for appropriate choices of the mechanism parameters. Thus, this new Lindahl mechanism provides a connection between the desirable welfare properties of Lindahl allocations and the desirable theoretical/ convergence properties of supermodular games.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12781.

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Date of creation: 15 Jan 2008
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Handle: RePEc:pra:mprapa:12781

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Related research
Keywords: Lindahl Equilibrium; Nash Implementation; Supermodular Games;

Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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  1. Bailey, Martin J, 1994. " Lindahl Mechanisms and Free Riders," Public Choice, Springer, vol. 80(1-2), pages 35-39, July.
  2. Yan Chen & Robert Gazzale, 2004. "When Does Learning in Games Generate Convergence to Nash Equilibria? The Role of Supermodularity in an Experimental Setting," American Economic Review, American Economic Association, vol. 94(5), pages 1505-1535, December. [Downloadable!]
  3. Yan Chen & Fang-Fang Tang, 1998. "Learning and Incentive-Compatible Mechanisms for Public Goods Provision: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 633-662, June. [Downloadable!] (restricted)
  4. Kim, Taesung, 1993. "A stable Nash mechanism implementing Lindahl allocations for quasi-linear environments," Journal of Mathematical Economics, Elsevier, vol. 22(4), pages 359-371. [Downloadable!] (restricted)
  5. Healy, Paul J., 2006. "Learning dynamics for mechanism design: An experimental comparison of public goods mechanisms," Journal of Economic Theory, Elsevier, vol. 129(1), pages 114-149, July. [Downloadable!] (restricted)
  6. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January. [Downloadable!] (restricted)
  7. Ted Bergstrom & Richard Cornes, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," University of California at Santa Barbara, Economics Working Paper Series 1983B, Department of Economics, UC Santa Barbara. [Downloadable!]
    Other versions:
  8. Smith, Vernon L, 1979. " An Experimental Comparison of Three Public Good Decision Mechanisms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 81(2), pages 198-215.
  9. Rabah Amir, 2005. "Supermodularity and Complementarity in Economics: An Elementary Survey," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 636-660, January.
    Other versions:
  10. Groves, Theodore & Ledyard, John O, 1980. "The Existence of Efficient and Incentive Compatible Equilibria with Public Goods," Econometrica, Econometric Society, vol. 48(6), pages 1487-1506, September. [Downloadable!] (restricted)
    Other versions:
  11. Walker, Mark, 1980. "On the Nonexistence of a Dominant Strategy Mechanism for Making Optimal Public Decisions," Econometrica, Econometric Society, vol. 48(6), pages 1521-40, September. [Downloadable!] (restricted)
  12. Milleron, Jean-Claude, 1972. "Theory of value with public goods: A survey article," Journal of Economic Theory, Elsevier, vol. 5(3), pages 419-477, December. [Downloadable!] (restricted)
  13. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Blackwell Publishing, vol. 46(2), pages 217-25, April. [Downloadable!] (restricted)
  14. Foley, Duncan K, 1970. "Lindahl's Solution and the Core of an Economy with Public Goods," Econometrica, Econometric Society, vol. 38(1), pages 66-72, January. [Downloadable!] (restricted)
  15. Smith, Vernon L, 1980. "Experiments with a Decentralized Mechanism for Public Good Decisions," American Economic Review, American Economic Association, vol. 70(4), pages 584-99, September. [Downloadable!] (restricted)
  16. Vega-Redondo, Fernando, 1989. "Implementation of Lindahl equilibrium: an integration of the static and dynamic approaches," Mathematical Social Sciences, Elsevier, vol. 18(3), pages 211-228, December. [Downloadable!] (restricted)
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