Utilitarian Mechanism Design for an Excludable Public Good

Abstract:     
This paper studies the design of optimal utilitarian mechanisms for an excludable public good. Excludability provides a basis for making people pay for admissions; the payments can be used for redistribution and/or funding. Whereas previous work assumed that admissions are governed by the payment or nonpayment of a price, this paper allows for arbitrary admission rules. With sufficient inequality aversion, nondegenerate randomization in admissions is shown to be desirable for certain model specifications, with and without participation constraints. The paper also gives a sufficient condition on the distribution of preferences under which randomization is undesirable.

Number of Pages in PDF File: 46

Keywords: Utilitarian welfare maximization, Admission rules for excludable public goods, Randomization in optimal mechanisms

JEL Classification: D61, D63, H21, H41

working papers series