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On Mechanisms for Costly Inclusion

Andrew Mackenzie and Christian Trudeau ()

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

Abstract: We investigate mechanisms in a class of production environments where each group of agents can `win' for an associated monetary cost; examples include the allocation of an indivisible object and the provision of a pure public good. A mechanism is satisfactory if and only if it is surplus-maximizing and honesty is necessarily a dominant strategy for each agent; it is autonomous if and only if it is satisfactory and production is funded through voluntary contributions of the agents; it is equitable if and only if it is satisfactory and no agent prefers another's bundle to his own. First, we introduce the notion of inclusion cost coverage for cost functions, and prove that this condition is necessary and sufficient for the existence of autonomous mechanisms (Theorem 1). Second, we prove that the cost function is symmetric and convex if and only if there are equitable mechanisms (Theorem 2); in this case, we characterize both the class of equitable mechanisms (Theorem 3) as well as the class of autonomous and equitable mechanisms (Theorem 4). We discuss a variety of applications and additional topics.

Keywords: game theory; second price auction, free-rider problem, pivot mechanism, Walrasian price, production. (search for similar items in EconPapers)
JEL-codes: D82 D61 H41 D44 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2019-01
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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