An Examination of Compensation Mechanisms to Solve the NIMBY Problem
NIMBY(Not In My Backyard) problems are ubiquitous. Even though it is evident that society needs noxious facilities such as waste sites, people oppose the siting of those facilities around their neighborhoods. Many compensation mechanisms are suggested by researchers in the literature. However, careful attention has rarely been paid to characterizing the optimal mechanism or to comparing the existing mechanisms under different settings. This paper defines the optimal compensation mechanism for the NIMBY problem and shows that the previous mechanisms suggested in the literature are not optimal. Furthermore, four alternative mechanisms are proposed. The existing and newly proposed mechanisms are compared in terms of efficiency and distributive effect. Finally, seven mechanisms are tested in experiments under two different settings. Their efficiencies and distributive effects are discussed.
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