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Strength in Numbers: Robust Mechanisms for Public Goods with Many Agents

Jin Xi and Haitian Xie

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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 $\sqrt{n}$-rate, the AMT mechanisms are both eventually ex-ante budget balanced and asymptotically efficient. When the cost grows faster than the $\sqrt{n}$-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: 2021-01, Revised 2023-05
New Economics Papers: this item is included in nep-mic and nep-upt
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Handle: RePEc:arx:papers:2101.02423