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Reducing Inefficiency in Public Good Provision Through Linking
Author(s) -
GALAVOTTI STEFANO
Publication year - 2014
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12065
Subject(s) - inefficiency , public good , valuation (finance) , economics , microeconomics , mechanism (biology) , mechanism design , mathematical economics , finance , philosophy , epistemology
We characterize the optimal mechanism for the provision of n public goods in an economy with m agents, binary valuations. The mechanism “links” the n problems together because decisions and transfers are based on the whole vector of valuations of the agents. In particular, the decision on whether or not to provide a public good depends not only on the valuations of the agents for that good but, in some cases, also on the valuations for the other goods reported by the low‐valuation agents. For the two‐agent case, we show that the mechanism is asymptotically efficient and we provide an example that compares its relative efficiency with optimal separate provision and with another asymptotically efficient mechanism in the literature.