Hazardous Facility Siting When Cost Information is Private: An Application of Multidimensional Mechanism Design
AbstractThe siting of noxious facilities often involves externalities that extend beyond the border of the community selected as a site. Thus, the private information of each community is potentially a vector of costs comprising a cost for each of the possible sites. I characterize the conditions for the existence of a mechanism that is incentive compatible, individual rational, and budget balancing and show that efficient mechanisms under reasonable assumptions will satisfy these conditions. However, incentive compatibility implies a pattern of compensation payments that often conflicts with commonly held views on how communities should be compensated for environmental costs.
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Bibliographic InfoPaper provided by EconWPA in its series Game Theory and Information with number 9702004.
Date of creation: 26 Feb 1997
Date of revision: 26 Feb 1997
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mechanism design; efficiency; auction;
Other versions of this item:
- Keith Waehrer, 2003. "Hazardous Facility Siting When Cost Information Is Private: An Application of Multidimensional Mechanism Design," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(4), pages 605-622, October.
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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