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Choosing and Sharing

  • Laurent-Lucchetti, Jérémy
  • Leroux, Justin

Implementing a project, like a nationwide nuclear waste disposal, which benefits all involved agents but brings major costs only to the host is often problematic. In practice, revelation issues and redistributional concerns are significant obstacles to achieving stable agreements. We address these issues by proposing the first mechanism to implement the efficient site (the host with the lowest cost) and share the exact cost while retaining total control over realized transfers. Our mechanism is simple and in the vein of the well-known Divide and Choose procedure. The unique Nash equilibrium outcome of our mechanism coincides with truthtelling, is budget-balanced, individually rational and immune to coalitional deviations. More generally, our mechanism can also handle the symmetric case of positive local externalities (e.g., Olympic Games) and even more complex situations where the usefulness of the project---regardless of its location---is not unanimous.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14929.

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Date of creation: Apr 2009
Date of revision:
Handle: RePEc:pra:mprapa:14929
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  1. Perry, M. & Reny, P.J., 1995. "A General Solution to King Solomon's Dilemma," Papers 9581, Tilburg - Center for Economic Research.
  2. Jackson, Matthew O., 1999. "A Crash Course in Implementation Theory," Working Papers 1076, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Hervé Moulin, 2010. "Auctioning or assigning an object: some remarkable VCG mechanisms," Social Choice and Welfare, Springer, vol. 34(2), pages 193-216, February.
  4. Moulin, Herve, 2001. "Axiomatic Cost and Surplis-Sharing," Working Papers 2001-06, Rice University, Department of Economics.
  5. George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 351-367.
  6. Laurent-Lucchetti, Jérémy & Leroux, Justin, 2009. "Choosing and Sharing," MPRA Paper 14929, University Library of Munich, Germany.
  7. Perez-Castrillo, David & Veszteg, Robert F., 2007. "Choosing a common project: Experimental evidence on the multibidding mechanism," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 394-411, July.
  8. David P�rez-Castrillo & David Wettstein, 2002. "Choosing Wisely: A Multibidding Approach," American Economic Review, American Economic Association, vol. 92(5), pages 1577-1587, December.
  9. Lars Ehlers, 2009. "Choosing wisely: the natural multi-bidding mechanism," Economic Theory, Springer, vol. 39(3), pages 505-512, June.
  10. Róbert F. Veszteg, 2004. "Multibidding Game under Uncertainty," Faculty Working Papers 14/04, School of Economics and Business Administration, University of Navarra.
  11. Frey, Bruno S & Oberholzer-Gee, Felix & Eichenberger, Reiner, 1996. "The Old Lady Visits Your Backyard: A Tale of Morals and Markets," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1297-1313, December.
  12. Jeremy Laurent-lucchetti & Justin Leroux, 2010. "Lindahl prices solve the NIMBY problem," Economics Bulletin, AccessEcon, vol. 30(3), pages 2457-2463.
  13. O'Sullivan Arthur, 1993. "Voluntary Auctions for Noxious Facilities: Incentives to Participate and the Efficiency of Siting Decisions," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages S12-S26, July.
  14. Minehart, Deborah & Neeman, Zvika, 2002. "Effective Siting of Waste Treatment Facilities," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 303-324, March.
  15. Peleg, Bezalel, 1978. "Consistent Voting Systems," Econometrica, Econometric Society, vol. 46(1), pages 153-61, January.
  16. Laurent-Lucchetti, Jérémy & Leroux, Justin, 2009. "Axiomatic foundation for Lindahl pricing in the NIMBY context," MPRA Paper 14930, University Library of Munich, Germany.
  17. Douglas Easterling, 1992. "Fair rules for siting a high-level nuclear waste repository," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 11(3), pages 442-475.
  18. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
  19. Kunreuther, Howard & Kleindorfer, Paul R, 1986. "A Sealed-Bid Auction Mechanism for Siting Noxious Facilities," American Economic Review, American Economic Association, vol. 76(2), pages 295-99, May.
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