Collusion‐Proof Samuelson Conditions for Public Goods

Jean-Jacques Laffont and David Martimort

Journal of Public Economic Theory, 1999, vol. 1, issue 4, 399-438

Abstract: We analyze a public good problem when agents form a grand coalition to promote their own collective goal instead of that of society as a whole. When collusion takes place under symmetric information, the collusion‐proof Samuelson rule takes a simple form that is close to an ex ante cost‐benefit analysis. Then, we analyze the case where agents collude under asymmetric information. First, we describe the set of collusion‐proof allocations. Second, we establish the collusion‐proof Samuelson rule that highlights the role of coalitional virtual valuations. Asymmetric information within the coalition allows the principal to recover some flexibility in the design of the optimal policy. We finally discuss the nature of the inefficiency created by the agents' collusive behavior and the scope of their ex ante gain in forming a coalition.

Date: 1999
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