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
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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