IDEAS home Printed from
   My bibliography  Save this article

The Demand Revealing Process: To Distribute the Surplus


  • Bailey, Martin J


Contrary to the established, frequently repeated proposition that its budget surplus cannot be distributed to taxpayers without disturbing the incentive compatibility of the demand-revealing process (DRP), the surplus can be distributed by reapplying the key concept of the DRP. There will remain an aggregate refund error that in a Bayesian sense is random with zero mean, and which vanishes O(1/N)-square as the economy becomes large through replication. To deal with income effects, when one does not restrict the domain of the mechanism to separable utility functions, the author suggests a variation of the DRP that preserves its incentive compatibility when N is finite. Copyright 1997 by Kluwer Academic Publishers

Suggested Citation

  • Bailey, Martin J, 1997. "The Demand Revealing Process: To Distribute the Surplus," Public Choice, Springer, vol. 91(2), pages 107-126, April.
  • Handle: RePEc:kap:pubcho:v:91:y:1997:i:2:p:107-26

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

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


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Sprumont, Yves, 2013. "Constrained-optimal strategy-proof assignment: Beyond the Groves mechanisms," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1102-1121.
    2. Kazuhiko Hashimoto & Kohei Shiozawa, 2016. "Strategy-Proof Probabilistic Mechanisms for Public Decision with Money," ISER Discussion Paper 0964, Institute of Social and Economic Research, Osaka University.
    3. Yan Long, 2020. "Optimal budget-balanced ranking mechanisms to assign identical objects," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(2), pages 467-502, September.
    4. Moulin, Hervé, 2009. "Almost budget-balanced VCG mechanisms to assign multiple objects," Journal of Economic Theory, Elsevier, vol. 144(1), pages 96-119, January.
    5. Nath, Swaprava & Sandholm, Tuomas, 2019. "Efficiency and budget balance in general quasi-linear domains," Games and Economic Behavior, Elsevier, vol. 113(C), pages 673-693.
    6. Toyotaka Sakai, 2017. "Considering Collective Choice: The Route 328 Problem in Kodaira City," The Japanese Economic Review, Japanese Economic Association, vol. 68(3), pages 323-332, September.
    7. Nicolaus Tideman & Florenz Plassmann, 2017. "Efficient collective decision-making, marginal cost pricing, and quadratic voting," Public Choice, Springer, vol. 172(1), pages 45-73, July.
    8. Sarkar, Soumendu, 2018. "Convergence of VCG mechanism to ex-post budget balance in a model of land acquisition," Mathematical Social Sciences, Elsevier, vol. 93(C), pages 37-46.
    9. Efthymios Athanasiou & Giacomo Valletta, 2021. "Undominated mechanisms and the provision of a pure public good in two agent economies," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(4), pages 763-795, November.
    10. Blumrosen, Liad & Solan, Eilon, 2023. "Selling spectrum in the presence of shared networks: The case of the Israeli 5G auction," Telecommunications Policy, Elsevier, vol. 47(2).
    11. Rickels, Wilfried & Quaas, Martin F. & Ricke, Katharine & Quaas, Johannes & Moreno-Cruz, Juan & Smulders, Sjak, 2020. "Who turns the global thermostat and by how much?," Energy Economics, Elsevier, vol. 91(C).
    12. Guo, Mingyu & Conitzer, Vincent, 2009. "Worst-case optimal redistribution of VCG payments in multi-unit auctions," Games and Economic Behavior, Elsevier, vol. 67(1), pages 69-98, September.
    13. Naroditskiy, Victor & Steinberg, Richard, 2015. "Maximizing social welfare in congestion games via redistribution," LSE Research Online Documents on Economics 62771, London School of Economics and Political Science, LSE Library.
    14. de Clippel, Geoffroy & Naroditskiy, Victor & Polukarov, Maria & Greenwald, Amy & Jennings, Nicholas R., 2014. "Destroy to save," Games and Economic Behavior, Elsevier, vol. 86(C), pages 392-404.
      • Geoffroy de Clippel & Louis Putterman & Victor Naroditskiy & Maria Polukarov & Amy Greenwald & Nicholas R. Jennings, 2012. "Destroy to Save," Working Papers 2012-9, Brown University, Department of Economics.
    15. Efthymios Athanasiou & Santanu Dey & Giacomo Valletta, 2016. "Groves mechanisms and communication externalities," Review of Economic Design, Springer;Society for Economic Design, vol. 20(1), pages 1-37, March.
    16. Kazuhiko Hashimoto, 2015. "Strategy-Proof Rule in Probabilistic Allocation Problem of an Indivisible Good and Money," ISER Discussion Paper 0931, Institute of Social and Economic Research, Osaka University.
    17. Naroditskiy, Victor & Steinberg, Richard, 2015. "Maximizing social welfare in congestion games via redistribution," Games and Economic Behavior, Elsevier, vol. 93(C), pages 24-41.
    18. McKitrick, Ross & Collinge, Robert A., 2002. "The Existence and Uniqueness of Optimal Pollution Policy in the Presence of Victim Defense Measures," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 106-122, July.
    19. Pivato, Marcus, 2011. "A fair pivotal mechanism for nonpecuniary public goods," MPRA Paper 34525, University Library of Munich, Germany.
    20. Athanasiou, E. & Dey, S. & Valletta, G., 2012. "On sharing the benefits of communication," Research Memorandum 016, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    21. Athanasiou, Efthymios, 2013. "A Solomonic solution to the problem of assigning a private indivisible good," Games and Economic Behavior, Elsevier, vol. 82(C), pages 369-387.
    22. Zakharenko, Roman, 2021. "Optimal compulsion for private assembly of property," Regional Science and Urban Economics, Elsevier, vol. 88(C).
    23. You, Jung S., 2015. "Optimal VCG mechanisms to assign multiple bads," Games and Economic Behavior, Elsevier, vol. 92(C), pages 166-190.

    More about this item


    Access and download statistics


    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:kap:pubcho:v:91:y:1997:i:2:p:107-26. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: .

    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.