On Groves Mechanisms for Costly Inclusion

Andrew Mackenzie and Christian Trudeau

No 1901, Working Papers from University of Windsor, Department of Economics

Abstract: We investigate Groves mechanisms for economies where (i) a social outcome specifies a group of winning agents, and (ii) a cost function associates each group with a monetary cost. Infeasible groups and revenue-generating groups are modeled using infinite costs and negative costs, respectively. First, we introduce a novel condition for cost functions, inclusion cost coverage, and prove that there are Groves mechanisms such that the agents cover the costs through voluntary payments if and only if the cost function satisfies this condition, in which case variants of the pivot mechanisms are such mechanisms (Theorem 1). Second, we establish that there are envy-free Groves mechanisms if and only if the cost function is convex and symmetric, in which case variants of the pivot mechanisms are such mechanisms (Theorem 2). It follows directly that whenever production efficient and envy-free allocations can be implemented in dominant strategies, this can moreover be done while funding production through voluntary payments. We discuss a variety of applications and additional topics.

Keywords: costly inclusion; Groves mechanism; pivot mechanism; Vickrey auction; free-rider problem; labor markets. (search for similar items in EconPapers)
JEL-codes: D24 D44 D47 D61 D63 D82 H41 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2021-07
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1901.pdf Third version, 2022 (application/pdf)

Related works:
Journal Article: On Groves mechanisms for costly inclusion (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:wis:wpaper:1901

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