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Sharing the cost of a public good: An incentive-constrained axiomatic approach

  • Maniquet, François
  • Sprumont, Yves

We study the problem of provision and cost-sharing of a public good in large economies where exclusion, complete or partial, is possible. We search for incentive-constrained efficient allocation rules that display fairness properties. Population monotonicity says that an increase in population should not be detrimental to anyone. Demand monotonicity states that an increase in the demand for the public good (in the sense of a first-order stochastic dominance shift in the distribution of preferences) should not be detrimental to any agent whose preferences remain unchanged. Under suitable domain restrictions, we give an explicit characterization of all incentive-constrained efficient allocation rules. We then show that there exists a unique incentive-constrained efficient and demand-monotonic allocation rule: the so-called serial rule. In the binary public good case, the serial rule is also the only incentive-constrained efficient and population-monotonic rule.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 68 (2010)
Issue (Month): 1 (January)
Pages: 275-302

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Handle: RePEc:eee:gamebe:v:68:y:2010:i:1:p:275-302
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Francois Maniquet & Yves Sprumont, 2002. "Welfare Egalitarianism in Non-Rival Environments," Economics Working Papers 0016, Institute for Advanced Study, School of Social Science.
  2. Dreze, Jacques H., 1980. "Public goods with exclusion," Journal of Public Economics, Elsevier, vol. 13(1), pages 5-24, February.
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  7. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1163-1188, October.
  8. François Maniquet & Yves Sprumont, 2004. "Fair Production and Allocation of an Excludable Nonrival Good," Econometrica, Econometric Society, vol. 72(2), pages 627-640, 03.
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  10. Kaneko, Mamoru, 1977. "The Ratio Equilibria and the Core of the Voting Game G(N, W) in a Public Goods Economy," Econometrica, Econometric Society, vol. 45(7), pages 1589-94, October.
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  12. 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.
  13. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 625-41, June.
  14. Hellwig, Martin F., 2005. "A utilitarian approach to the provision and pricing of excludable public goods," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 1981-2003, December.
  15. MANIQUET, François, . "Implementation of allocation rules under perfect information," CORE Discussion Papers RP -1734, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  16. Crawford, Vincent P, 1979. "A Procedure for Generating Pareto-Efficient Egalitarian-Equivalent Allocations," Econometrica, Econometric Society, vol. 47(1), pages 49-60, January.
  17. Demange, Gabrielle, 1984. "Implementing Efficient Egalitarian Equivalent Allocations," Econometrica, Econometric Society, vol. 52(5), pages 1167-77, September.
  18. James A. Dearden, 1998. "Serial cost sharing of excludable public goods: general cost functions," Economic Theory, Springer, vol. 12(1), pages 189-198.
  19. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 217-25, April.
  20. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
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