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Implementing Pareto Optimal and Individually Rational Outcomes by Veto

Author

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  • M. Remzi Sanver

    (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

We introduce a simple veto mechanism where each agent can veto any subset of alternatives, by paying a veto cost for each vetoed alternative. The outcome is the set of non-vetoed alternatives or, if this set is empty, some previously fixed alternative which is declared the disagreement outcome. Under fairly mild axioms to extend individual preferences over alternatives to sets of alternatives and assuming quasi-linear preferences over outcome-money bundles, we show that the Nash equilibrium outcomes of the veto mechanism coincide with the Pareto optimal outcomes which are individually rational according to the disagreement outcome. The positive result prevails when individual preferences admit indifferences and even for the case of two agents. We also show that under stronger axioms to extend preferences over alternatives to sets, strong Nash implementation (hence double implementation) is also possible with the same veto mechanism.
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Suggested Citation

  • M. Remzi Sanver, 2018. "Implementing Pareto Optimal and Individually Rational Outcomes by Veto," Post-Print hal-02517252, HAL.
    • Handle: RePEc:hal:journl:hal-02517252
    DOI: 10.1007/s10726-018-9562-1
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    References listed on IDEAS

    as
    1. Kelly, Jerry S, 1977. "Strategy-Proofness and Social Choice Functions without Singlevaluedness," Econometrica, Econometric Society, vol. 45(2), pages 439-446, March.
    2. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 23-38.
    3. Benoît, Jean-Pierre & Ok, Efe A., 2008. "Nash implementation without no-veto power," Games and Economic Behavior, Elsevier, vol. 64(1), pages 51-67, September.
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    5. Mueller, Dennis C., 1978. "Voting by veto," Journal of Public Economics, Elsevier, vol. 10(1), pages 57-75, August.
    6. M. Sanver, 2006. "Nash implementing non-monotonic social choice rules by awards," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(2), pages 453-460, June.
    7. İpek Özkal-Sanver & M. Sanver, 2006. "Nash implementation via hyperfunctions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 26(3), pages 607-623, June.
    8. Hervé Moulin, 1981. "The Proportional Veto Principle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(3), pages 407-416.
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    Cited by:

    1. Laslier, Jean-François & Núñez, Matías & Remzi Sanver, M., 2021. "A solution to the two-person implementation problem," Journal of Economic Theory, Elsevier, vol. 194(C).

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