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Reducing inefficiency in public good provision through linking

  • Stefano Galavotti


    (Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze)

We derive the optimal mechanism for the provision of n identical public goods in an economy with two agents, binary valuations. The mechanism "links" the n problems together because decisions and transfers are based on the whole vector of valuations of the agents. In particular, if agents have mixed valuations for a public good (one agent has a high valuation, the other a low valuation), the good is provided if the low valuation agent has a sufficiently high average valuation for the whole bundle of goods. We show that the mechanism is asymptotically efficient and we provide an example which compares the gains in terms of efficiency with optimal separate provision and with another asymptotically efficient mechanism in the literature.

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Paper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Mathematical Economics with number 2010-01.

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Length: 29 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:flo:wpaper:2010-01
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