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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- Eric Maskin & Tomas Sjostrom, 2001.
Economics Working Papers
0006, Institute for Advanced Study, School of Social Science.
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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.
- Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March.
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