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The Unique Informational Effciency of the Lindahl Allocation Process in Economies with Public Goods

Tian, Guoqiang (2001): The Unique Informational Effciency of the Lindahl Allocation Process in Economies with Public Goods.

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Abstract

This paper investigates the informational requirements of resource allocation processes in public goods economies with any number of firms and commodities. We show that the Lindahl mechanism is informationally effcient in the sense that it uses the smallest message space among smooth resource allocation processes that are informationally decentralized and realize Pareto optimal allocations over the class of public goods economies where Lindahl equilibria exist. Furthermore, we show that the Lindahl mechanism is the unique informationally effcient decentralized mechanism that realizes Pareto effcient and individually rational allocations in public goods economies with Cobb-Douglas utility functions and quadratic production functions.

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