Collective Decision Through an Intermediary
40 Pages Posted: 2 Mar 2021 Last revised: 13 May 2021
Date Written: January 6, 2021
An intermediary must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to decisions. Examples include the government acting as an intermediary in the provision of public goods. We show that an imperfectly informed intermediary can help achieve an ex post efficient decision. We propose a cross-subsidization mechanism that implements an efficient decision. A condition on the intermediary's information that ensures efficiency is characterized. Our results provide a rationale for the government's involvement in public good projects based on information.
Keywords: Collective Decision; Provision of Public Goods, Asymmetric Information, Cross-Subsidization Mechanism, Public Finance
JEL Classification: C70, D82, G23, G38, H41
Suggested Citation: Suggested Citation