Undertaking Nonharmful or Harmful Public Projects Through Unit-by-Unit Contribution: Coordination and Pareto Efficiency
34 Pages Posted: 27 Sep 2016
Date Written: September 26, 2016
We examine in detail the implementation of a project that is non-harmful for all agents as well as a project that is harmful for some agents through a unit-by-unit contribution mechanism. For a project that is non-harmful for all agents, efficient implementation is supported at one regular Nash equilibrium and several refined Nash equilibria that are stable against coalition deviations. In this sense, this mechanism works well. On the other hand, when the project is harmful for some agents, this mechanism may not have a Nash equilibrium with efficient implementation of the project. Even when such a Nash equilibrium exists, it may not be selected by any of the refined Nash equilibria. Thus, in this case, this mechanism does not work. Our result shows that the merit of the unit-by-unit contribution mechanism reported in the literature is partially extensible to the implementation of a public project.
Keywords: public project; unit-by-unit contribution; Pareto efficiency; strong Nash equilibria; coalition-proof Nash equilibria
JEL Classification: C72, D62, D74, H41
Suggested Citation: Suggested Citation