Coalition-proof full efficient implementation
Journal of Economic Theory, 2018, vol. 177, issue C, 659-677
The Vickrey–Clarke–Groves and d'Aspremont–Gerard-Varet mechanisms implement efficient social choice by compensating each agent for the externalities that his report imposes on all other agents. Instead of aggregate compensations, which may lead to profitable coalitional deviations, this paper provides an alternative mechanism, in which each pair of agents directly compensate each other for the pairwise externalities they impose. Under the assumption of independent private values, any agent is guaranteed to receive his ex ante efficient payoff by reporting truthfully, regardless of others' strategies. This absence of ex ante externalities makes the mechanism coalition-proof, and makes all equilibria efficient.
Keywords: Mechanism design; Internalizing externalities; Coalition-proofness; Full implementation (search for similar items in EconPapers)
JEL-codes: D62 D82 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:177:y:2018:i:c:p:659-677
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