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Reducing Inefficiency in Public Good Provision Through Linking

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  • STEFANO GALAVOTTI

Abstract

We characterize the optimal mechanism for the provision of n public goods in an economy with m agents, binary valuations. The mechanism “links” the n problems together because decisions and transfers are based on the whole vector of valuations of the agents. In particular, the decision on whether or not to provide a public good depends not only on the valuations of the agents for that good but, in some cases, also on the valuations for the other goods reported by the low-valuation agents. For the two-agent case, we show that the mechanism is asymptotically efficient and we provide an example that compares its relative efficiency with optimal separate provision and with another asymptotically efficient mechanism in the literature.

Suggested Citation

  • Stefano Galavotti, 2014. "Reducing Inefficiency in Public Good Provision Through Linking," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 427-466, June.
  • Handle: RePEc:bla:jpbect:v:16:y:2014:i:3:p:427-466
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    File URL: http://hdl.handle.net/10.1111/jpet.12065
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    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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