Abstract
Groves and Ledyard (Econometrica 45:783–809, 1977) constructed a mechanism attaining Pareto efficient allocations in the presence of public goods. After this path-breaking paper, many mechanisms have been proposed to attain desirable allocations with public goods. Thus, economists have thought that the free-rider problem is solved, in theory. Our view to this problem is not so optimistic. Rather, we propose fundamental impossibility theorems with public goods. In the previous mechanism design, it was implicitly assumed that every agent must participate in the mechanism that the designer provides. This approach neglects one of the basic features of public goods: non-excludability. We explicitly incorporate non-excludability and then show that it is impossible to construct a mechanism in which every agent has an incentive to participate.
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We thank an anonymous referee and Takeshi Suzuki for useful comments. Research was partially supported by the Grant in Aid for Scientific Research of the Ministry of Education, Culture, Sports, Science and Technology in Japan. Yamato thanks the Division of the Humanities and Social Sciences at the California Institute of Technology for their hospitality during the period when this draft was written.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Saijo, T., Yamato, T. Fundamental impossibility theorems on voluntary participation in the provision of non-excludable public goods. Rev Econ Design 14, 51–73 (2010). https://doi.org/10.1007/s10058-009-0100-0
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DOI: https://doi.org/10.1007/s10058-009-0100-0
Keywords
- Impossibility theorems
- Voluntary participation
- Non-excludable public goods
- Lindahl equilibrium
- Voluntary contribution mechanism
- Olson’s conjecture