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Generalized Groves–Ledyard mechanisms

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  • Healy, Paul J.
  • Jain, Ritesh

Abstract

Groves and Ledyard (1977) construct a mechanism for public goods procurement that can be viewed as a direct-revelation Groves mechanism in which agents announce a parameter of a quadratic approximation of their true preferences. The mechanism's Nash equilibrium outcomes are efficient. The budget is balanced because Groves mechanisms are balanced for the announced quadratic preferences. Tian (1996) subsequently discovered a richer set of budget-balancing preferences. We replicate the Groves–Ledyard construction using this expanded set of preferences, and uncover a new set of complex mechanisms that generalize the original Groves–Ledyard mechanism. The original mechanism, however, remains the most appealing in terms of both simplicity and stability.

Suggested Citation

  • Healy, Paul J. & Jain, Ritesh, 2017. "Generalized Groves–Ledyard mechanisms," Games and Economic Behavior, Elsevier, vol. 101(C), pages 204-217.
  • Handle: RePEc:eee:gamebe:v:101:y:2017:i:c:p:204-217
    DOI: 10.1016/j.geb.2016.01.005
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    References listed on IDEAS

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    1. 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.
    2. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
    3. Hurwicz, Leonid, 1979. "On allocations attainable through Nash equilibria," Journal of Economic Theory, Elsevier, vol. 21(1), pages 140-165, August.
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    5. Chen, Yan & Plott, Charles R., 1996. "The Groves-Ledyard mechanism: An experimental study of institutional design," Journal of Public Economics, Elsevier, vol. 59(3), pages 335-364, March.
    6. Jordan, J. S., 1986. "Instability in the implementation of Walrasian allocations," Journal of Economic Theory, Elsevier, vol. 39(2), pages 301-328, August.
    7. Healy, Paul J. & Mathevet, Laurent, 2012. "Designing stable mechanisms for economic environments," Theoretical Economics, Econometric Society, vol. 7(3), September.
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    12. Matthew J. Essen, 2013. "A Simple Supermodular Mechanism that Implements Lindahl Allocations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(3), pages 363-377, June.
    13. Liqun Liu & Guoqiang Tian, 1999. "A characterization of the existenceof optimal dominant strategy mechanisms," Review of Economic Design, Springer;Society for Economic Design, vol. 4(3), pages 205-218.
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    More about this item

    Keywords

    Nash implementation; Public goods; Demand revelation;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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