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SSRN Electronic Journal
Article . 2009 . Peer-reviewed
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Research . 2010
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Research . 2010
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Public-Good Provision in a Large Economy

Authors: Martin Hellwig; Felix Bierbrauer;

Public-Good Provision in a Large Economy

Abstract

We propose a new approach to the normative analysis of public-good provision in an economy that is large so that any one individual is too insignicant to have a noticeable eect on the provision levels of public goods. In such an economy, the standard mechanism design problem of calibrating people’s payments to the inuence they have on public-good provision is moot. In the absence of participation constraints, the rst-best provision rule of providing the public good if and only if the average per capita valuation exceeds the per capita cost can be implemented if the costs are shared equally among individuals. Equal cost sharing is actually necessary if the mechanism is to be robust in the sense of Bergemann and Morris (2005). However, the rst-best provision rule with equal cost sharing is vulnerable to collective deviations in the sense of Laont and Martimort (2000). Thus, people with valuations below the per capita provision cost would all benet from a collective deviation inducing a downward bias into the assessment of the average per capita valuation. We develop a concept of coalition-proofness and show that a coalition-proof and robust mechanism cannot condition on the average per capita valuation, but only on the population shares of people with valuations above and below the per capita provision costs. The result suggests an intriguing link between mechanism design theory for large economies and voting.

Keywords

Mechanism Design, Public-good provision, ddc:330, D70, D60, D82, Large Economy, Mechanism Design, Public-good provision, H41, Large Economy, jel: jel:D70, jel: jel:D60, jel: jel:D82, jel: jel:H41

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    popularity
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    Average
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
8
Average
Top 10%
Top 10%
bronze