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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- 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.
- Partha Dasgupta & Peter Hammond & Eric Maskin, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Oxford University Press, vol. 47(5), pages 857-860.
- Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
- Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
- Maskin, Eric & Sjostrom, Tomas, 2001.
5-01-1, Pennsylvania State University, Department of Economics.
- Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
- E. Maskin, 1983. "The Theory of Implementation in Nash Equilibrium: A Survey," Working papers 333, Massachusetts Institute of Technology (MIT), Department of Economics.
- Maskin, Eric S, 1994. "The Invisible Hand and Externalities," American Economic Review, American Economic Association, vol. 84(2), pages 333-37, May.
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