Public-Good Provision in a Large Economy
51 Pages Posted: 7 Jan 2010
Date Written: December 1, 2009
We propose a new approach to the normative analysis of public-good provision in a large economy. Our analysis is based on a mechanism design approach that involves a requirement of coalition-proofness, as well as a requirement of robustness, so that the mechanism must not depend on specific assumptions about individual beliefs. Our main result shows that such a mechanism can condition only on the population shares of people with valuations above and below the per capita provision costs. This suggests an intriguing link between mechanism design for large economies and voting.
Keywords: Large Economy, Mechanism Design, Public-good provision
JEL Classification: D6, D7, D82, H41
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