Collective Decision Through an Intermediary

40 Pages Posted: 2 Mar 2021 Last revised: 13 May 2021

See all articles by Yunan Li

Yunan Li

City University of Hong Kong (CityUHK)

Xingtan Zhang

University of Colorado at Boulder - Leeds School of Business

Date Written: January 6, 2021

Abstract

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

Li, Yunan and Zhang, Xingtan, Collective Decision Through an Intermediary (January 6, 2021). Available at SSRN: https://ssrn.com/abstract=3761473 or http://dx.doi.org/10.2139/ssrn.3761473

Yunan Li

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Xingtan Zhang (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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