Choosing and Sharing

Laurent-Lucchetti, Jérémy and Leroux, Justin (2009): Choosing and Sharing.

Abstract

Implementing a project, like a nationwide nuclear waste disposal, which benefits all involved agents but brings major costs only to the host is often problematic. In practice, revelation issues and redistributional concerns are significant obstacles to achieving stable agreements. We address these issues by proposing the first mechanism to implement the efficient site (the host with the lowest cost) and share the exact cost while retaining total control over realized transfers. Our mechanism is simple and in the vein of the well-known Divide and Choose procedure. The unique Nash equilibrium outcome of our mechanism coincides with truthtelling, is budget-balanced, individually rational and immune to coalitional deviations. More generally, our mechanism can also handle the symmetric case of positive local externalities (e.g., Olympic Games) and even more complex situations where the usefulness of the project---regardless of its location---is not unanimous.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public goods; local externalities; NIMBY; implementation; mechanism design; VCG mechanisms
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General

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