Funding public projects: A case for the Nash product rule

Florian Brandl, Felix Brandt, Matthias Greger, Dominik Peters (mail@dominik-peters.de), Christian Stricker and Warut Suksompong
Additional contact information
Florian Brandl: HCM - Hausdorff Center for Mathematics - Rheinische Friedrich-Wilhelms-Universität Bonn
Felix Brandt: TUM - Technische Universität Munchen - Technical University Munich - Université Technique de Munich
Matthias Greger: TUM - Technische Universität Munchen - Technical University Munich - Université Technique de Munich
Dominik Peters: LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Christian Stricker: TUM - Technische Universität Munchen - Technical University Munich - Université Technique de Munich
Warut Suksompong: NUS - National University of Singapore

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Abstract: We study a mechanism design problem where a community of agents wishes to fund public projects via voluntary monetary contributions by the community members. This serves as a model for public expenditure without an exogenously available budget, such as participatory budgeting or voluntary tax programs, as well as donor coordination when interpreting charities as public projects and donations as contributions. Our aim is to identify a mutually beneficial distribution of the individual contributions. In the preference aggregation problem that we study, agents with linear utility functions over projects report the amount of their contribution, and the mechanism determines a socially optimal distribution of the money. We identify a specific mechanism-the Nash product rule-which picks the distribution that maximizes the product of the agents' utilities. This rule is Pareto efficient and incentivizes agents to contribute their entire budget while spending each agent's contribution only on projects the agent finds acceptable.

Date: 2022
New Economics Papers: this item is included in nep-des, nep-gth, nep-ppm, nep-sea and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-03818329v1
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Citations: View citations in EconPapers (3)

Published in Journal of Mathematical Economics, 2022, 99, pp.102585. ⟨10.1016/j.jmateco.2021.102585⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03818329

DOI: 10.1016/j.jmateco.2021.102585

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