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Interim Efficiency in a Public Goods Problem

Ledyard, John O. and Palfrey, Thomas R. (1999) Interim Efficiency in a Public Goods Problem. Econometrica, 67 (2). pp. 435-448. ISSN 1468-0262. doi:10.1111/1468-0262.00028.

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IN THIS PAPER, WE CONSIDER the following classical public goods problem. A group of individuals must decide on a level of a public good that is produced according to constant returns to scale up to some capacity constraint. In addition to deciding the level of public good, the group must decide how to tax the individuals in the group in order to cover the cost. The distribution of the burden of taxation is important because different individuals have different marginal rates of substitution between the private good taxes and the public good, and may have different incomes as well. These individual marginal rates of substitution are private information; that is, each individual knows his or her own marginal rate of substitution, but not those of the other members of the group. Adopting a Bayesian mechanism design framework, we assume that the distribution of marginal rates of substitution is common knowledge.

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Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:© 1999 Econometric Society. Manuscript received August, 1996; final revision received April, 1998. We are grateful for the support of the National Science Foundation Grant No. SBR-9223701, and of the New Millennium Program of the Jet Propulsion Laboratory of NASA. The second author is grateful for the hospitality and research support at Laboratoire d’Economie Industrielle and at Centre d’Enseignement et de Recherche en Analyse Socio-Economique. An early draft of this article was prepared for the 1996 Francqui Prize Colloquium. We are grateful to its organizer, Claude d’Aspremont, and to the participants, for useful comments. The article has also benefited from the comments of seminar participants at Université de la Mediterranée, Northwestern University, Harvard University, Université de Cergy-Pontoise, the Conference on Efficiency in Economics with Public Goods and Private Information at the University of Venice, the Roy Seminar at Ecole des Ponts et Chaussées, and from discussions with Louis-André Gérard-Varet and Jean-Charles Rochet. Three referees and a coeditor provided additional helpful suggestions which have improved the article. The usual disclaimer applies.
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Laboratoire d’Economie IndustrielleUNSPECIFIED
Centre d’Enseignement et de Recherche en Analyse Socio-EconomiqueUNSPECIFIED
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Social Science Working Paper956
Series Name:Social Science Working Paper
Issue or Number:2
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Official Citation:Ledyard, J. O. and Palfrey, T. R. (1999), A Characterization of Interim Efficiency with Public Goods. Econometrica, 67: 435–448. doi: 10.1111/1468-0262.00028
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65194
Deposited On:16 Mar 2016 21:55
Last Modified:10 Nov 2021 23:41

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