Mechanism Design for the Environment
We argue that when externalities such as pollution are nonexcludable, agents must be compelled to participate in a "mechanism" to ensure a Pareto-efficient outcome. We survey some of the main findings of the mechanism-design (implementation-theory) literature -- such as the Nash implementation theorem, the Gibbard-Satterthwaite theorem, the Vickrey-Clarke-Groves mechanism, and the Arrow/d'Aspremont-Gerard-Varet mechanism -- and consider their implications for the environment, in particular the reduction of aggregate emissions of pollution. We consider the cases of both complete and incomplete information.
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- Maskin, Eric & Sjostrom, Tomas, 2002.
Handbook of Social Choice and Welfare,
in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 5, pages 237-288
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- Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
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- E. Maskin, 1983. "The Theory of Implementation in Nash Equilibrium: A Survey," Working papers 333, Massachusetts Institute of Technology (MIT), Department of Economics.
- Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
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