A Solution to the Problem of Externalities when Agents are Well-Informed
The author describes a class of simple two-stage mechanisms that implement efficient allocations as subgame-perfect equilibria for economic environments involving externalities. These mechanisms, known as compensation mechanisms, solve a wide variety of externalities problems, including implementation of Lindahl allocations, regulation of monopoly, and efficient solutions to the prisoner's dilemma. Copyright 1994 by American Economic Association.
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- Andreoni,J. & Varian,H., 1999. "Pre-play contracting in the prisoners' dilemma," Working papers 18, Wisconsin Madison - Social Systems.
- Bagnoli, Mark & Lipman, Barton L, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 583-601, October.
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