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Sharing the Cost of a Public Good: an Incentive-Constrained Axiomatic Approach

  • SPRUMONT, Yves
  • MANIQUET, François

We study the problem of provision and cost-sharing of a public good in large economies where exclusion, complete or partial, is possible. We search for incentive-constrained efficient allocation rules that display fairness properties. Population monotonicity says that an increase in population should not be detrimental to anyone. Demand monotonicity states that an increase in the demand for the public good (in the sense of a first-order stochastic dominance shift in the distribution of preferences) should not be detrimental to any agent whose preferences remain unchanged. Under suitable domain restrictions, there exists a unique incentive-constrained efficient and demand-monotonic allocation rule: the so-called serial rule. In the binary public good case, the serial rule is also the only incentive-constrained efficient and population-monotonic rule.

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File URL: http://hdl.handle.net/1866/2146
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2006-09.

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Length: 51 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:mtl:montde:2006-09
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Web page: http://www.sceco.umontreal.ca

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  1. Sprumont, Y., 1996. "Equal Factor Equivalence in Economies with Multiple Public Goods," Cahiers de recherche 9627, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Demange, Gabrielle, 1984. "Implementing Efficient Egalitarian Equivalent Allocations," Econometrica, Econometric Society, vol. 52(5), pages 1167-77, September.
  3. Norman,P., 2000. "Efficient mechanisms for public goods with use exclusions," Working papers 15, Wisconsin Madison - Social Systems.
  4. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
  5. William Thomson, 2007. "Fair Allocation Rules," RCER Working Papers 539, University of Rochester - Center for Economic Research (RCER).
  6. François Maniquet, 2003. "Implementation of allocation rules under perfect information," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 21(2), pages 323-346, October.
  7. James A. Dearden, 1998. "Serial cost sharing of excludable public goods: general cost functions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(1), pages 189-198.
  8. Hellwig, Martin F., 2005. "A utilitarian approach to the provision and pricing of excludable public goods," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 1981-2003, December.
  9. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
  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 427-38, March.
  11. MANIQUET, François & SPRUMONT, Yves, 2002. "Fair Production and Allocation of an Excludable Nonrival Good," Cahiers de recherche 2002-04, Universite de Montreal, Departement de sciences economiques.
  12. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  13. MANIQUET, François & SPRUMONT, Yves, . "Welfare egalitarianism in non-rival environments," CORE Discussion Papers RP 1826, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Andreu Mas-Colell, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 625-641.
  15. Hervé Moulin, 1994. "Serial Cost-Sharing of Excludable Public Goods," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 305-325.
  16. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  17. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  18. L. Hurwicz, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 217-225.
  19. 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.
  20. Mutuswami, Suresh, 2004. "Strategyproof cost sharing of a binary good and the egalitarian solution," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 271-280, November.
  21. Kaneko, Mamoru, 1977. "The Ratio Equilibria and the Core of the Voting Game G(N, W) in a Public Goods Economy," Econometrica, Econometric Society, vol. 45(7), pages 1589-94, October.
  22. Crawford, Vincent P, 1979. "A Procedure for Generating Pareto-Efficient Egalitarian-Equivalent Allocations," Econometrica, Econometric Society, vol. 47(1), pages 49-60, January.
  23. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1163-1188.
  24. Dreze, Jacques H., 1980. "Public goods with exclusion," Journal of Public Economics, Elsevier, vol. 13(1), pages 5-24, February.
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