Van Essen, M. Soc Choice Welf (2012) 38: 365. doi:10.1007/s00355-011-0532-7
There are no general theoretical results on the stability of the Lindahl mechanism introduced by Chen (Econ Theory 19:773–790, 2002). We show that despite not fitting the requirements of the Milgrom and Roberts 1990 stability result for supermodular games, if the Chen mechanism induces a supermodular game, then the best reply map is a contraction. This gives us an easy to identify sufficient condition for dynamic stability of equilibrium.
Public goodsLindahl equilibriumMechanism designSupermodular gamesStability