Public Goods, Participation Constraints, and Democracy: A Possibility Theorem

29 Pages Posted: 18 Dec 2008

See all articles by H. P. Gruner

H. P. Gruner

University of Mannheim - Department of Economics; Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

Date Written: December 2008

Abstract

It is well known that ex post efficient mechanisms for the provision of indivisible public goods are not interim individually rational. However, the corresponding literature assumes that agents who veto a mechanism can enforce a situation in which the public good is never provided. This paper instead considers majority voting with uniform cost sharing as the relevant status quo. Efficient mechanisms may then exist, which also satisfy all agents' interim participation constraints. In this case, ex post inefficient voting mechanisms can be replaced by efficient ones without reducing any individual's expected utility. Intuitively, agents with a low willingness to pay have to contribute more under majority rule than under an efficient mechanism with a balanced budget. This possibility theorem is not universal in the sense of Schweizer (Games and Economic Behavior, 2005).

Keywords: Ex post efficiency, Majority voting, Participation constraints, Possibility theorem, Public goods

JEL Classification: D02, D61, D71, H41

Suggested Citation

Grüner, Hans Peter, Public Goods, Participation Constraints, and Democracy: A Possibility Theorem (December 2008). CEPR Discussion Paper No. DP7066, Available at SSRN: https://ssrn.com/abstract=1311189

Hans Peter Grüner (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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