Public-Good Provision in Large Economies

49 Pages Posted: 8 Oct 2015

See all articles by Felix J. Bierbrauer

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Martin F. Hellwig

Max Planck Institute for Research on Collective Goods; University of Bonn - Department of Economics

Date Written: October 2015

Abstract

In a large economy, a first-best provision rule for a public good is robustly implementable with budget balance because no one individual alone can affect the aggregate outcome. First-best outcomes can, however, be blocked by coalitions of agents acting in concert. With a requirement of immunity against robustly blocking coalitions, we find that, for a pubic good that come as a single indivisible unit, a monotonic social choice function cannot condition on preference intensities but only on the population shares of people favoring one outcome over another. Any such social choice function can be implemented by a simple voting mechanism. With more public-good provision levels, more complicated mechanisms are required, but they still involve the counting of votes rather than an assessment of benefits. Monotonicity and immunity against robust blocking thus provide a foundation for the use of voting mechanisms.

Keywords: Mechanism Design, Public-good provision, Large Economy, Voting Mechanisms, Robust Incentive Compatibility, Immunity against Robustly Blocking Coalitions, Monotonic Social Choice Functions

JEL Classification: D82, H41, D70, D60

Suggested Citation

Bierbrauer, Felix J. and Hellwig, Martin F., Public-Good Provision in Large Economies (October 2015). MPI Collective Goods Preprint, No. 2015/12. Available at SSRN: https://ssrn.com/abstract=2670425 or http://dx.doi.org/10.2139/ssrn.2670425

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Martin F. Hellwig (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Bonn - Department of Economics

Adenauerallee 24-42
D-53113 Bonn
Germany

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