IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v225y2023ics0047272723001354.html
   My bibliography  Save this article

A mechanism for the efficient provision of Potential Pareto public goods

Author

Listed:
  • Ferraz, Eduardo
  • Mantilla, César

Abstract

Providing a public good that causes a local harm to its host poses two problems previously unexplored together: where to locate it and how large it should be. We propose a mechanism combining some market-like properties with a modified second-price auction. The mechanism selects a host, a facility size, a compensation for hosting the project, and determines how the compensation is split among the non-hosts. If each community bids truthfully for becoming the host–a strategy from which no community has incentives to deviate–the selected allocation is globally optimal, even if communities’ preferences are private information. In contrast with the literature, the host pays the second-highest bid while receiving the market benefits to prevent distortions in the optimal size.

Suggested Citation

  • Ferraz, Eduardo & Mantilla, César, 2023. "A mechanism for the efficient provision of Potential Pareto public goods," Journal of Public Economics, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:pubeco:v:225:y:2023:i:c:s0047272723001354
    DOI: 10.1016/j.jpubeco.2023.104953
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272723001354
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jpubeco.2023.104953?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stefan Ambec & Yann Kervinio, 2016. "Cooperative decision-making for the provision of a locally undesirable facility," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(1), pages 119-155, January.
    2. 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.
    3. Toyotaka Sakai, 2012. "Fair waste pricing: an axiomatic analysis to the NIMBY problem," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 499-521, June.
    4. Minehart, Deborah & Neeman, Zvika, 2002. "Effective Siting of Waste Treatment Facilities," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 303-324, March.
    5. Van Essen, Matthew & Walker, Mark, 2017. "A simple market-like allocation mechanism for public goods," Games and Economic Behavior, Elsevier, vol. 101(C), pages 6-19.
    6. Laurent-Lucchetti, Jérémy & Leroux, Justin, 2011. "Choosing and sharing," Games and Economic Behavior, Elsevier, vol. 73(1), pages 296-300, September.
    7. Dekel, Sagi & Fischer, Sven & Zultan, Ro’i, 2017. "Potential Pareto Public Goods," Journal of Public Economics, Elsevier, vol. 146(C), pages 87-96.
    8. Meyerhoff, Jürgen & Ohl, Cornelia & Hartje, Volkmar, 2010. "Landscape externalities from onshore wind power," Energy Policy, Elsevier, vol. 38(1), pages 82-92, January.
    9. David Pérez-Castrillo & David Wettstein, 2002. "Choosing Wisely: A Multibidding Approach," American Economic Review, American Economic Association, vol. 92(5), pages 1577-1587, December.
    10. Wolfgang Buchholz & Wolfgang Peters, 2007. "Justifying the Lindahl solution as an outcome of fair cooperation," Public Choice, Springer, vol. 133(1), pages 157-169, October.
    11. Kunreuther, Howard & Kleindorfer, Paul & Knez, Peter J. & Yaksick, Rudy, 1987. "A compensation mechanism for siting noxious facilities: Theory and experimental design," Journal of Environmental Economics and Management, Elsevier, vol. 14(4), pages 371-383, December.
    12. Zerrahn, Alexander, 2017. "Wind Power and Externalities," Ecological Economics, Elsevier, vol. 141(C), pages 245-260.
    13. Yan Chen, 2002. "A family of supermodular Nash mechanisms implementing Lindahl allocations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(4), pages 773-790.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferraz, Eduardo & Mantilla, César, 2020. "Lindahl vs. Lindahl: Optimal siting and sizing of a noxious facility," Working papers 65, Red Investigadores de Economía.
    2. Ghidoni, Riccardo, 2017. "Mistrust and Opposition to Large-Scale Projects : An Experiment on the Role of Uncertainty," Discussion Paper 2017-053, Tilburg University, Center for Economic Research.
    3. Stefan Ambec & Yann Kervinio, 2016. "Cooperative decision-making for the provision of a locally undesirable facility," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(1), pages 119-155, January.
    4. Alberti, Federica & Mantilla, César, 2020. "Provision of noxious facilities using a market-like mechanism: A simple implementation in the lab," Working papers 35, Red Investigadores de Economía.
    5. Duygu Yengin, 2013. "Identical Preferences Lower Bound for Allocation of Heterogenous Tasks and NIMBY Problems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(4), pages 580-601, August.
    6. Laurent-Lucchetti, Jérémy & Leroux, Justin, 2009. "Axiomatic foundation for Lindahl pricing in the NIMBY context," MPRA Paper 14930, University Library of Munich, Germany.
    7. Martin Besfamille & Jean-Marie Lozachmeur, 2010. "NIMBY and mechanism design under different constitutional constraints," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(2), pages 114-132, April.
    8. Pérez-Castrillo, David & Quérou, Nicolas, 2012. "Smooth multibidding mechanisms," Games and Economic Behavior, Elsevier, vol. 76(2), pages 420-438.
    9. Roberta Occhilupo & Giuliana Palumbo & Paolo Sestito, 2011. "Siting public facilities: a theoretical and empirical analysis of the Nimby syndrome in Italy," Questioni di Economia e Finanza (Occasional Papers) 91, Bank of Italy, Economic Research and International Relations Area.
    10. Hamilton, Timothy L. & Eynan, Amit, 2023. "Siting noxious facilities: Efficiency and majority rule decisions," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1344-1354.
    11. Laurent-Lucchetti, Jérémy & Leroux, Justin, 2011. "Choosing and sharing," Games and Economic Behavior, Elsevier, vol. 73(1), pages 296-300, September.
    12. Rudy Santore, 2014. "Noxious Facilities, Environmental Damages, and Efficient Randomized Siting," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 101-116, January.
    13. Dugstad, Anders & Grimsrud, Kristine & Kipperberg, Gorm & Lindhjem, Henrik & Navrud, Ståle, 2020. "Acceptance of wind power development and exposure – Not-in-anybody's-backyard," Energy Policy, Elsevier, vol. 147(C).
    14. Richard Benjamin & Jeffrey Wagner, 2006. "Reconsidering the law and economics of low-level radioactive waste management," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 8(1), pages 33-53, December.
    15. Kevin Techer, 2023. "Hazardous waste transportation: a cost allocation analysis," Working Papers hal-04099139, HAL.
    16. Peri, Erez & Becker, Nir & Tal, Alon, 2020. "What really undermines public acceptance of wind turbines? A choice experiment analysis in Israel," Land Use Policy, Elsevier, vol. 99(C).
    17. Jehiel, Philippe & Moldovanu, Benny, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 142, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    18. Wehrle, Sebastian & Gruber, Katharina & Schmidt, Johannes, 2021. "The cost of undisturbed landscapes," Energy Policy, Elsevier, vol. 159(C).
    19. Garrone, Paola & Groppi, Angelamaria, 2012. "Siting locally-unwanted facilities: What can be learnt from the location of Italian power plants," Energy Policy, Elsevier, vol. 45(C), pages 176-186.
    20. Anders Dugstad & Kristine Grimsrud & Gorm Kipperberg & Henrik Lindhjem & Ståle Navrud, 2020. "Acceptance of national wind power development and exposure. A case-control choice experiment approach," Discussion Papers 933, Statistics Norway, Research Department.

    More about this item

    Keywords

    NIMBY; LULU; Lindahl outcomes; Public projects; Mechanism design;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:225:y:2023:i:c:s0047272723001354. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.