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Groves mechanisms and communication externalities

Efthymios Athanasiou (), Santanu Dey and Giacomo Valletta ()

Review of Economic Design, 2016, vol. 20, issue 1, 37 pages

Abstract: We put forward a model of private goods with externalities. Agents derive benefit from communicating with each other. In order to communicate they need to operate on a common platform. Adopting new platforms is costly. We first provide an algorithm that determines the efficient outcome. Then we prove that no individually rational and feasible Groves mechanism exists. We provide sufficient conditions that determine when an individually rational Groves mechanism runs a deficit and we characterize the individually rational Groves mechanism that minimizes such deficit whenever it occurs. Moreover, for 2-agent economies, we single out the only feasible and symmetrical Groves mechanism that is not Pareto dominated by another strategy-proof, feasible and symmetrical mechanism. Copyright The Author(s) 2016

Keywords: Groves mechanisms; Externality; Budget surplus or deficit; Pareto undominated mechanisms; D70; D62; C60 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10058-015-0180-y

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