Optimal Provision of Multiple Excludable Public Goods

Abstract

This paper studies the optimal provision mechanism for multiple excludable public goods when agents' valuations are private information. For a parametric class of problems with binary valuations, we demonstrate that the optimal mechanism involves bundling if a regularity condition, akin to a hazard rate condition, on the distribution of valuations is satisfied. Bundling alleviates the free riding problem in large economies in two ways: first, it may increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions. If the regularity condition is violated, then the optimal solution replicates the separate provision outcome.Hanming Fang

Public goods, participation constraints, and democracy: A possibility theorem

“…The present paper contributes to the literature on the ex post efficient provision of public goods, including in particular the papers by Güth and Hellwig (1986), Mailath and Postlewaite (1990), and Hellwig (2003). Güth and Hellwig (1986) prove an impossibility result à la Myerson and Satterthwaite (1983) in the public goods context. Mailath and Postlewaite (1990) consider the case with a large number of agents when the size of the project varies with the size of the population.…”

“…However, if one introduces stricter equilibrium concepts such as Bergemann and Morris's (2005) robustness criterion, the results are again negative (Bierbrauer and Hellwig, 2008). Another way of guaranteeing participation in efficient mechanisms which has recently been studied in the literature, is the bundling of various decisions (Casella, 2005;Fang andNorman, 2005, 2008;Jackson and Sonnenschein, 2007).…”

Optimal delegation with multi-dimensional decisions

“…This extension is also likely to meet strong technical difficulties, but certainly deserves some attention. 22 For all those 20 Martimort [38] described this situation as a case of public agency. 21 A previous version of this paper [31] analyzed public mechanism with two principals (see also [25] for further analysis of the cheap talk setting combining both public and private messages).…”

“…The characterization of the equilibrium mechanisms with public mechanism remains an interesting open problem. 22 The literature on multi-dimensional screening has already stressed that pooling allocations are pervasive in nonlinear pricing environments [8,20,46]. cases, we conjecture that the decomposition between the average decision and its spread will play a crucial role in contract design.…”

“…From a theoretical viewpoint, this comparison may depend on the fine details of the contracting possibilities available under a non-cooperative design. For instance, the non-cooperative outcome may depend on whether or not principals observe decisions that they do not directly control 20 and whether the agent's messages towards each principal are private or public, the latter case being a priori closer to the cooperative outcome developed in this paper. 21 It would also be worth investigating optimal mechanisms in more complex environments allowing more general utility functions, more than two decisions and more general distributions of types.…”