Public-Good Provision in Large Economies
49 Pages Posted: 8 Oct 2015
Date Written: October 2015
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: Suggested Citation