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A unified approach to the revelation of public goods preferences and to optimal income taxation

  • Felix Bierbrauer

    ()

    (Max Planck Institute for Research on Collective Goods, Bonn)

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    We study a large economy model in which individuals have private information about their productive abilities and their preferences for public goods. A mechanism design approach is used to characterize implementable tax and expenditure policies. A robustness requirement in the sense of Bergemann and Morris (2005) yields individual incentive compatibility constraints that are equivalent to those in the theory of optimal income taxation in the tradition of Mirrlees (1971). Adding a requirement of coalition-proofness yields a set of collective incentive conditions which are akin those in the literature on public goods provision under private information on preferences, in the tradition of Clarke (1971) and Groves (1973).

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    File URL: http://www.coll.mpg.de/pdf_dat/2008_39online.pdf
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    Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2008_39.

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    Date of creation: Oct 2008
    Handle: RePEc:mpg:wpaper:2008_39
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    7. Felix Bierbrauer, 2008. "Optimal Income Taxation, Public Goods Provision and Robust Mechanism Design," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_31, Max Planck Institute for Research on Collective Goods.
    8. Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Cowles Foundation Discussion Papers 1421, Cowles Foundation for Research in Economics, Yale University.
    9. Ledyard, John O., 1978. "Incentive compatibility and incomplete information," Journal of Economic Theory, Elsevier, vol. 18(1), pages 171-189, June.
    10. 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 427-438, March.
    11. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
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    19. Hellwig, Martin, 2004. "Optimal income taxation, public-goods provision and public-sector pricing : a contribution to the foundations of public economics," Papers 04-42, Sonderforschungsbreich 504.
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    21. Gahvari, Firouz, 2006. "On the marginal cost of public funds and the optimal provision of public goods," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1251-1262, August.
    22. Olszewski, Wojciech, 2004. "Coalition strategy-proof mechanisms for provision of excludable public goods," Games and Economic Behavior, Elsevier, vol. 46(1), pages 88-114, January.
    23. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-478, August.
    24. Cremer, Jacques, 1996. "Manipulations by Coalitions Under Asymmetric Information: The Case of Groves Mechanisms," Games and Economic Behavior, Elsevier, vol. 13(1), pages 39-73, March.
    25. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
    26. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    27. Al-Najjar, Nabil I., 2004. "Aggregation and the law of large numbers in large economies," Games and Economic Behavior, Elsevier, vol. 47(1), pages 1-35, April.
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