Hazardous Facility Siting When Cost Information is Private: An Application of Multidimensional Mechanism Design

Keith Waehrer ()

Game Theory and Information from University Library of Munich, Germany

Abstract: The siting of noxious facilities often involves externalities that extend beyond the border of the community selected as a site. Thus, the private information of each community is potentially a vector of costs comprising a cost for each of the possible sites. I characterize the conditions for the existence of a mechanism that is incentive compatible, individual rational, and budget balancing and show that efficient mechanisms under reasonable assumptions will satisfy these conditions. However, incentive compatibility implies a pattern of compensation payments that often conflicts with commonly held views on how communities should be compensated for environmental costs.

Keywords: mechanism design; efficiency; auction (search for similar items in EconPapers)
JEL-codes: C7 D82 H23 (search for similar items in EconPapers)
Date: 1997-02-26, Revised 1997-05-22
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Journal Article: Hazardous Facility Siting When Cost Information Is Private: An Application of Multidimensional Mechanism Design (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:9702004

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