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Collusion‐Proof Samuelson Conditions for Public Goods

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  • Jean‐Jacques Laffont
  • David Martimort

Abstract

We analyze a public good problem when agents form a grand coalition to promote their own collective goal instead of that of society as a whole. When collusion takes place under symmetric information, the collusion‐proof Samuelson rule takes a simple form that is close to an ex ante cost‐benefit analysis. Then, we analyze the case where agents collude under asymmetric information. First, we describe the set of collusion‐proof allocations. Second, we establish the collusion‐proof Samuelson rule that highlights the role of coalitional virtual valuations. Asymmetric information within the coalition allows the principal to recover some flexibility in the design of the optimal policy. We finally discuss the nature of the inefficiency created by the agents' collusive behavior and the scope of their ex ante gain in forming a coalition.

Suggested Citation

  • Jean‐Jacques Laffont & David Martimort, 1999. "Collusion‐Proof Samuelson Conditions for Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 399-438, October.
    • Handle: RePEc:bla:jpbect:v:1:y:1999:i:4:p:399-438
    DOI: 10.1111/1097-3923.00019
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    Cited by:

    1. Cecile Aubert & Jerome Pouyet, 2000. "Collusion Under Asymmetric Information and Institutional Incompleteness," Econometric Society World Congress 2000 Contributed Papers 0806, Econometric Society.
    2. Bierbrauer, Felix, 2006. "Optimal Income Taxation and Public Good Provision in a Two-Class Economy," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 97, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. David Martimort & Philippe De Donder & Etienne Billette De Villemeur, 2005. "An Incomplete Contract Perspective on Public Good Provision," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 149-180, April.
    4. Laffont, Jean Jacques, 1997. "Collusion et information asymétrique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 73(4), pages 595-609, décembre.
    5. Felix Bierbrauer, 2009. "Optimal Income Taxation and Public Good Provision with Endogenous Interest Groups," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(2), pages 311-342, April.
    6. Felix Bierbrauer, 2005. "Optimal Income Taxation and Public Good Provision in a Two-Class Economy," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2005_25, Max Planck Institute for Research on Collective Goods.
    7. Felix Bierbrauer, 2006. "Collectively Incentive Compatible Tax Systems," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2006_24, Max Planck Institute for Research on Collective Goods.

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