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Mechanism Design by a Politician

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  • Giovanni Valvassori Bolg`e

Abstract

A set of agents has to make a decision about the provision of a public good and its financing. Agents have heterogeneous values for the public good and each agent's value is private information. An agenda-setter has the right to make a proposal about a public-good level and a vector of contributions. For the proposal to be approved, only the favourable votes of a subset of agents are needed. If the proposal is not approved, a type-dependent outside option is implemented. I characterize the optimal public-good provision and the coalition-formation for any outside option in dominant strategies. Optimal public-good provision might be a non-monotonic function of the outside option public-good level. Moreover, the optimal coalition might be a non-convex set of types.

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  • Giovanni Valvassori Bolg`e, 2024. "Mechanism Design by a Politician," Papers 2406.08936, arXiv.org.
    • Handle: RePEc:arx:papers:2406.08936
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