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On Mechanisms for Costly Inclusion

Author

Listed:
  • Andrew Mackenzie

    () (Department of Economics, Maastricht University)

  • Christian Trudeau

    () (Department of Economics, University of Windsor)

Abstract

We investigate mechanisms in a class of production environments where each group of agents can `win' for an associated monetary cost; examples include the allocation of an indivisible object and the provision of a pure public good. A mechanism is satisfactory if and only if it is surplus-maximizing and honesty is necessarily a dominant strategy for each agent; it is autonomous if and only if it is satisfactory and production is funded through voluntary contributions of the agents; it is equitable if and only if it is satisfactory and no agent prefers another's bundle to his own. First, we introduce the notion of inclusion cost coverage for cost functions, and prove that this condition is necessary and sufficient for the existence of autonomous mechanisms (Theorem 1). Second, we prove that the cost function is symmetric and convex if and only if there are equitable mechanisms (Theorem 2); in this case, we characterize both the class of equitable mechanisms (Theorem 3) as well as the class of autonomous and equitable mechanisms (Theorem 4). We discuss a variety of applications and additional topics.

Suggested Citation

  • Andrew Mackenzie & Christian Trudeau, 2019. "On Mechanisms for Costly Inclusion," Working Papers 1901, University of Windsor, Department of Economics.
  • Handle: RePEc:wis:wpaper:1901
    as

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    File URL: http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1901.pdf
    File Function: First version, 2019
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    game theory; second price auction; free-rider problem; pivot mechanism; Walrasian price; production.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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