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Funding public projects: A case for the Nash product rule

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  • Brandl, Florian
  • Brandt, Felix
  • Greger, Matthias
  • Peters, Dominik
  • Stricker, Christian
  • Suksompong, Warut

Abstract

We study a mechanism design problem where a community of agents wishes to fund public projects via voluntary monetary contributions by the community members. This serves as a model for public expenditure without an exogenously available budget, such as participatory budgeting or voluntary tax programs, as well as donor coordination when interpreting charities as public projects and donations as contributions. Our aim is to identify a mutually beneficial distribution of the individual contributions. In the preference aggregation problem that we study, agents with linear utility functions over projects report the amount of their contribution, and the mechanism determines a socially optimal distribution of the money. We identify a specific mechanism—the Nash product rule—which picks the distribution that maximizes the product of the agents’ utilities. This rule is Pareto efficient and incentivizes agents to contribute their entire budget while spending each agent’s contribution only on projects the agent finds acceptable.

Suggested Citation

  • Brandl, Florian & Brandt, Felix & Greger, Matthias & Peters, Dominik & Stricker, Christian & Suksompong, Warut, 2022. "Funding public projects: A case for the Nash product rule," Journal of Mathematical Economics, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:mateco:v:99:y:2022:i:c:s0304406821001476
    DOI: 10.1016/j.jmateco.2021.102585
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    References listed on IDEAS

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    Cited by:

    1. Haris Aziz & Sujit Gujar & Manisha Padala & Mashbat Suzuki & Jeremy Vollen, 2022. "Coordinating Monetary Contributions in Participatory Budgeting," Papers 2206.05966, arXiv.org, revised Feb 2023.
    2. Xiaohui Bei & Xinhang Lu & Warut Suksompong, 2021. "Truthful Cake Sharing," Papers 2112.05632, arXiv.org, revised Feb 2022.
    3. Haris Aziz & Patrick Lederer & Xinhang Lu & Mashbat Suzuki & Jeremy Vollen, 2024. "Sequential Payment Rules: Approximately Fair Budget Divisions via Simple Spending Dynamics," Papers 2412.02435, arXiv.org.
    4. Felix Brandt & Matthias Greger & Erel Segal-Halevi & Warut Suksompong, 2023. "Coordinating Charitable Donations," Papers 2305.10286, arXiv.org, revised Sep 2024.
    5. Beikverdi, Majid & Tehrani, Nasim Ghanbar & Shahanaghi, Kamran, 2024. "A Bi-level model for district-fairness participatory budgeting: Decomposition methods and application," European Journal of Operational Research, Elsevier, vol. 314(1), pages 340-362.

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