Social Cost and Groves Mechanisms

Donald E. Campbell

Economic Notes, 2002, vol. 31, issue 1, 167-174

Abstract: type="main" xml:lang="en">

When an individual’s reported preference scheme makes a difference to the selection of a policy, that individual’s report imposes a cost on the rest of society because the selected policy would have been different had the individual’s reported preference been different. In a paper in Economic Notes, Giacomo Bonanno argues that the penalty assessed by the pivotal mechanism is not equal to the cost that the individual’s participation imposes on the rest of society. This note argues to the contrary, by presenting what we believe to be the correct definition of social cost.

(J.E.L: D62, D71, H41).

Date: 2002
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