Strength in numbers: robust mechanisms for public goods with many agents

Jin Xi () and Haitian Xie ()
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Jin Xi: University of California, San Diego
Haitian Xie: Guanghua School of Management, Peking University

Social Choice and Welfare, 2023, vol. 61, issue 3, No 7, 649-683

Abstract: Abstract This study examines the mechanism design problem for public goods provision in a large economy with n independent agents. We propose a class of dominant-strategy incentive compatible and ex-post individually rational mechanisms, which we call the adjusted mean-thresholding (AMT) mechanisms. We show that when the cost of provision grows slower than the $$\sqrt{n}$$ n -rate, the AMT mechanisms are both eventually ex-ante budget balanced and asymptotically efficient. When the cost grows faster than the $$\sqrt{n}$$ n -rate, in contrast, we show that any incentive compatible, individually rational, and eventually ex-ante budget balanced mechanism must have provision probability converging to zero and hence cannot be asymptotically efficient. The AMT mechanisms have a simple form and are more informationally robust when compared to, for example, the second-best mechanism. This is because the construction of an AMT mechanism depends only on the first moment of the valuation distribution.

Date: 2023
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DOI: 10.1007/s00355-023-01466-2

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