The conservative equal costs rule, the serial cost sharing rule and the pivotal mechanism: asymptotic welfare loss comparisons for the case of an excludable public project |
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Authors: | Rajat Deb Laura Razzolini Tae Kun Seo |
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Affiliation: | (1) Department of Economics, Southern Methodist University, Dallas, TX 75275, USA;(2) Department of Economics, School of Business, Virginia Commonwealth University, 1015 Floyd Avenue, Box 844000, Richmond, VA 23284-4000, USA;(3) Department of Economics, Southern Methodist University, Dallas, TX 75275, USA |
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Abstract: | We examine the asymptotic behavior of two strategyproof mechanisms discussed by Moulin for public goods – the conservative equal costs rule (CER) and the serial cost sharing rule (SCSR) – and compare their performance to that of the pivotal mechanism (PM) from the Clarke–Groves family. Allowing the individuals’ valuations for an excludable public project to be random variables, we show under very general assumptions that expected welfare loss generated by the CER, as the size of the population increases, becomes arbitrarily large. However, all moments of the SCSR’s random welfare loss asymptotically converge to zero. The PM does better than the SCSR, with its welfare loss converging even more rapidly to zero. |
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Keywords: | Strategy proof Serial cost sharing Pivotal mechanism Asymptotic welfare loss Efficient surplus |
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