Incentives and a Process Converging to the Core of a Public Goods Economy
The paper considers economies involving one public good, one private good, and constant returns to scale. It is shown that the process proposed earlier in Chander (1983, 1987a, and 1987b) always converges to an allocation which is in the core of the economy. This is then interpreted as an incentive property of the process and it is shown that there exists no process which always converges to the core and in which truth-telling constitutes a dominance equilibrium of the 'local incentive game'.
I would like to thank Jacques Dreze and Henry Tulkens for their helpful suggestions. Thanks are also due to Jean-Jacques Laffont for his comments. I have also benefited from a presentation at the Caltech Workshop.
Submitted - sswp677.pdf