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A Mechanism for Allocating the Expenses of Public Goods: Analyses of a Swedish Government Project

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  • Yang, Der-Yuan

Abstract

Bohm (1982) reported a Swedish census project, which used a cost-sharing mechanism giving participants incentives to misrepresent their willingness to pay (WTP), yet still ended up providing a public good. In this paper we offer a theoretical analysis of the mechanism and propose two revisions. In the first revision, the incentives to overstate or understate are randomized, weakening participants’ tendency to misrepresent WTP. Whereas in the second revision, reporting true WTP is participants’ weakly dominant strategy. Our revisions delineate a simple approach to induce true WTP, while the Swedish mechanism can be treated as a special case.

Suggested Citation

  • Yang, Der-Yuan, 1997. "A Mechanism for Allocating the Expenses of Public Goods: Analyses of a Swedish Government Project," University of California at Santa Barbara, Economics Working Paper Series qt3mx5z1b4, Department of Economics, UC Santa Barbara.
    • Handle: RePEc:cdl:ucsbec:qt3mx5z1b4
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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.
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    3. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
    4. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    5. Peter Bohm, 1971. "An Approach to the Problem of Estimating Demand for Public Goods," Palgrave Macmillan Books, in: Peter Bohm & Allen V. Kneese (ed.), The Economics of Environment, pages 94-105, Palgrave Macmillan.
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