Working Paper: CEPR ID: DP7066
Authors: Hans Peter Grüner
Abstract: It is well known that ex post efficient mechanisms for the provision of indivisible public goods are not interim individually rational. However, the corresponding literature assumes that agents who veto a mechanism can enforce a situation in which the public good is never provided. This paper instead considers majority voting with uniform cost sharing as the relevant status quo. Efficient mechanisms may then exist, which also satisfy all agents' interim participation constraints. In this case, ex post inefficient voting mechanisms can be replaced by efficient ones without reducing any individual's expected utility. Intuitively, agents with a low willingness to pay have to contribute more under majority rule than under an efficient mechanism with a balanced budget. This possibility theorem is not universal in the sense of Schweizer (Games and Economic Behavior, 2005).
Keywords: ex post efficiency; majority voting; participation constraints; possibility theorem; public goods
JEL Codes: D02; D61; D71; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| type of mechanism (L64) | agents' preferences (D82) |
| majority voting (D79) | contributions by agents with low willingness to pay (D64) |
| VCG mechanism (C71) | higher expected utilities for all agents (D81) |
| cost parameters (D24) | feasibility of efficient mechanisms (D47) |
| efficient project choice (C52) | balanced budget (H61) |