Group for Research in Decision Analysis

Axiomatic Characterizations of Some Indirect Nash Mechanisms to Solve the Free-Rider Problem

Charles Figuières Université Montpellier 1, France

Our paper proposes an original angle to overcome the free-rider problem in the provision of public good. For a given outcome (specifically a Lindhal allocation), we ask what axioms have to be imposed on the mechanisms that have the ability to Nash-implement it. Put differently, we axiomatize the means to achieve a given target. It is showed that Lindhal allocations can be Nash-implemented by a class of mechanisms that satisfies two conditions: i) budget balance, and ii) a "Lindhal" partial differential equation. This class encompasses, but does not reduce to, well-known mechanisms like Walker (1981) and Falkinger (1996).