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Lindahl vs. Lindahl: Optimal siting and sizing of a noxious facility

Eduardo Ferraz Castelo Branco Ferreira () and César Mantilla ()

Working papers from Red Investigadores de Economía

Abstract: Providing a noxious facility poses two problems previously unexplored together: where to locate it and how large it should be. We propose a mechanism combining some market-like properties with a modified second-price auction. The mechanism selects a host, a facility size, a compensation for hosting the project, and determines how the compensation and building costs are split among the non-hosts. Regardless of the selected host, any equilibrium outcome of this mechanism is a Lindahl allocation. If each community bids truthfully for becoming the host-a strategy which no community has incentives to deviate-the selected Lindahl allocation is globally optimal.

Keywords: NIMBY; LULU; Lindahl outcomes; Public projects; Mechanism design (search for similar items in EconPapers)
JEL-codes: D61 H40 R53 (search for similar items in EconPapers)
Pages: 33
Date: 2020-09
New Economics Papers: this item is included in nep-des, nep-ore and nep-ppm
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Persistent link: https://EconPapers.repec.org/RePEc:rie:riecdt:65

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