A Solution to the Problem of Externalities when Agents are Well-Informed}

Hal Varian ()

Microeconomics from University Library of Munich, Germany

Abstract: I describe a simple two-stage mechanism, the compensation mechanism, that implements efficient allocations in economic environments involving externalities. The compensation mechanism can be used to solve a wide variety of externalities problems, including the standard problem of public goods provision. It requires that that the agents know the magnitudes of the benefits and costs that they impose on other agents, but will also work with naive agents who follow a simple tatonnement.

JEL-codes: D1 D2 D3 D4 (search for similar items in EconPapers)
Date: 1994-01-18
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Related works:
Journal Article: A Solution to the Problem of Externalities When Agents Are Well-Informed (1994)
Working Paper: A Solution to the Problem of Externalities when Agents are Well-Informed (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:9401003

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