No Externalities: A Characterization of Efficiency and Incentive Compatibility with Public Goods

Joseph Ostroy and Uzi Segal

No 769, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We show that efficient anonymous incentive compatible (dominant strategy) mechanisms for public goods eliminate externalities, i.e., each individual is unable to change the welfare of anyone else. The characterization is used to derive existence and non-existence results for models with a finite number of individuals and to explain existence results in the continuum. A similar characterization and conclusions are demonstrated for private goods in [7]. However, unlike private goods, elimination of externalities with public goods implies that individuals cannot change the outcome. Hence, such mechanisms provide only weak incentives for truth-telling.

Keywords: Public goods; private goods; no externalities; incentive compatibility; duality (search for similar items in EconPapers)
JEL-codes: C72 D62 D70 H41 (search for similar items in EconPapers)
Date: 2010-09-22
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Journal Article: No externalities: a characterization of efficiency and incentive compatibility with public goods (2012)
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