Incentive-based Decentralization: Expected-Externality Payments Induce Efficient Behaviour in Groups

John W. Pratt and Richard Zeckhauser

Chapter 13 in Arrow and the Ascent of Modern Economic Theory, 1987, pp 439-483 from Palgrave Macmillan

Abstract: Abstract Thirty-five years ago Kenneth Arrow asked a profound question: Is it ‘formally possible to pass from a set of known individual tastes to a pattern of social decision-making, the procedure in question being required to satisfy certain natural conditions’? (Arrow, 1951, p. 2). He laid out an appealing set of conditions and demonstrated that the answer was ‘No’. The vast literature that followed, frequently played musical chairs with his requirements while it tiptoed along the border of infeasibility.

Keywords: Nash Equilibrium; Central Authority; Collective Decision; Transfer Payment; Incentive Effect (search for similar items in EconPapers)
Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-07239-2_13

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DOI: 10.1007/978-1-349-07239-2_13

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