nep-des New Economics Papers
on Economic Design
Issue of 2020‒10‒12
two papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Lindahl vs. Lindahl: Optimal siting and sizing of a noxious facility By Ferraz, Eduardo; Mantilla, César
  2. Stable agreements through liability rules: a multi- choice games approach to the social cost problem By Kevin Techer

  1. By: Ferraz, Eduardo; Mantilla, César
    Abstract: Providing a noxious facility poses two problems previously unexplored together: where to locate it and how large it should be. We propose a mechanism combining some market-like properties with a modified second-price auction. The mechanism selects a host, a facility size, a compensation for hosting the project, and determines how the compensation and building costs are split among the non-hosts. Regardless of the selected host, any equilibrium outcome of this mechanism is a Lindahl allocation. If each community bids truthfully for becoming the host-a strategy which no community has incentives to deviate-the selected Lindahl allocation is globally optimal.
    Keywords: NIMBY; LULU; Lindahl outcomes; Public projects; Mechanism design
    JEL: D61 H40 R53
    Date: 2020–09
  2. By: Kevin Techer (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon)
    Abstract: We consider a class of social cost problems where one polluter interacts with an arbitrary number of potential victims. Agents are supposed to cooperate and negotiate an optimal pollution level together with monetary transfers. We examine multi-choice cooperative games associated with a social cost problem and an assignment (or mapping) of rights. We introduce a class of mappings of rights that takes into account the pollution intensity and we consider three properties on mappings of rights: core compatibility, Kaldor-Hicks core compatibility and no veto power for a victim. We demonstrate that there exist only two families of mappings of rights that satisfy core compatibility. However, no mapping of rights satisfies Kaldor-Hicks core compatibility and no veto power for a victim.
    Keywords: Externality,Liability rules,Multi-choice cooperative game,Core
    Date: 2020

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