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On public good provision mechanisms with dominant strategies and balanced budget

Author

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  • Kuzmics, Christoph

    (Center for Mathematical Economics, Bielefeld University)

  • Steg, Jan-Henrik

    (Center for Mathematical Economics, Bielefeld University)

Abstract

Consider a mechanism for the binary public good provision problem that is dominant strategy incentive compatible (DSIC), ex-post individually rational (EPIR), and ex-post budget balanced (EPBB). Suppose this mechanism has the additional property that the utility from participating in the mechanism to the lowest types is zero for all agents. Such a mechanism must be of a threshold form, in which there is a fixed threshold for each agent such that the public good is not provided if there is an agent with a value below her threshold and is provided if all agents’ values exceed their respective threshold. There are mechanism that are DSIC, EPIR, and EPBB that are not of the threshold form. Mechanisms that maximize welfare subject to DSIC, EPIR, and EPBB must again have the threshold form. Finally, mechanisms that are DSIC, EPIR, EPBB and that furthermore satisfy the condition that there is at least one type profile in which all agents can block the provision of the public good, also must be of the threshold form. As we allow individuals’ values for the public good to be negative and positive, our results cover examples including bilateral trade, bilateral wage negotiations, a seller selling to a group of individuals (who then have joint ownership rights), and rezoning the use of land.

Suggested Citation

  • Kuzmics, Christoph & Steg, Jan-Henrik, 2016. "On public good provision mechanisms with dominant strategies and balanced budget," Center for Mathematical Economics Working Papers 553, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:553
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    References listed on IDEAS

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    Cited by:

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    3. Martimort, David, 2019. ""When Olson Meets Dahl": From Inefficient Groups Formation to Inefficient Policy-Making," CEPR Discussion Papers 13843, C.E.P.R. Discussion Papers.
    4. Hagen, Martin & Hernando-Veciana, Ángel, 2021. "Multidimensional bargaining and posted prices," Journal of Economic Theory, Elsevier, vol. 196(C).
    5. Takashi Kunimoto & Cuiling Zhang, 2021. "On incentive compatible, individually rational public good provision mechanisms," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 431-468, August.
    6. Felix Bierbrauer & Justus Winkelmann, 2018. "All or Nothing: State Capacity and Optimal Public Goods Provision," CESifo Working Paper Series 7238, CESifo.
    7. Arvaniti, Maria & Carvajal, Andrés, 2018. "Risk externalities: When financial imperfections are not the problem, but part of the solution," Journal of Mathematical Economics, Elsevier, vol. 77(C), pages 87-100.
    8. Moritz Drexl & Andreas Kleiner, 2018. "Why Voting? A Welfare Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 10(3), pages 253-271, August.
    9. Jin Xi & Haitian Xie, 2021. "Strength in Numbers: Robust Mechanisms for Public Goods with Many Agents," Papers 2101.02423, arXiv.org, revised May 2023.
    10. Kuzmics, Christoph & Steg, Jan-Henrik, 2017. "On public good provision mechanisms with dominant strategies and balanced budget," Journal of Economic Theory, Elsevier, vol. 170(C), pages 56-69.
    11. Hagen, Martin, 2023. "Collusion-proof mechanisms for multi-unit procurement," Games and Economic Behavior, Elsevier, vol. 138(C), pages 281-298.
    12. Kiho Yoon, 2018. "Optimal robust allocation of private goods," Discussion Paper Series 1803, Institute of Economic Research, Korea University.
    13. Bierbrauer, Felix & Winkelmann, Justus, 2020. "All or nothing: State capacity and optimal public goods provision," Journal of Economic Theory, Elsevier, vol. 185(C).
    14. Jin Xi & Haitian Xie, 2023. "Strength in numbers: robust mechanisms for public goods with many agents," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(3), pages 649-683, October.
    15. Hans Gersbach & Stephan Imhof & Oriol Tejada, 2021. "Channeling the final say in politics: a simple mechanism," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(1), pages 151-183, February.

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    More about this item

    Keywords

    Public good provision; asymmetric information; dominant strategy;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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