The Strategy-Proof Provision of Public Goods under Congestion and Crowding Preferences

Abstract

We examine the strategy-proof provision of excludable public goods when agents care not only about the level of provision of a public good, but also the number of consumers. We show that on such domains strategy-proof and efficient social choice functions satisfying an outsider independence condition must be rigid in that they must always assign a fixed number of consumers, regardless of individual desires to participate. The fixed number depends on the attitudes of agents regarding group size - being small when congestion effects dominate (individuals prefer to have fewer other consumers) and large when cost sharing effects dominate (agents prefer to have more consumers). A hierarchical rule selects which consumers participate and a variation of a generalized median rule to selects the level of the public good. Under heterogeneity in agents' views on the optimal number of consumers, strategy-proof, efficient, and outsider independent social choice functions are much more limited and in an important case must be dictatorial.