Financial support under NSF Grants SES-9986190 and SES-0316493 is gratefully acknowledged, as is support from the University of Chicago, where Jackson was visiting when this research began. We thank Zachary Cohn and Phil Reny for calling our attention to the treatment of participation constraints, Bill Zame for questions about coalitional considerations, and Robert Veszteg and Hitoshi Matsushima as discussants of the paper. We also thank the editor, three anonymous referees, Mahmut Erdem, Drew Fudenberg, Eric Maskin, and Laurent Mathevet for their comments and suggestions.
Overcoming Incentive Constraints by Linking Decisions1
Article first published online: 29 JAN 2007
Volume 75, Issue 1, pages 241–257, January 2007
How to Cite
Jackson, M. O. and Sonnenschein, H. F. (2007), Overcoming Incentive Constraints by Linking Decisions. Econometrica, 75: 241–257. doi: 10.1111/j.1468-0262.2007.00737.x
This paper supercedes “The Linking of Collective Decisions and Efficiency,” Caltech Social Science Working Paper 1159, March 2003. A longer version of this paper with additional examples, discussion, and results can be found at http://www.stanford.edu/~jacksonm/linking.pdf.
- Issue published online: 29 JAN 2007
- Article first published online: 29 JAN 2007
- Manuscript received December, 2003; final revision received May, 2006.
- Mechanism design;
- Bayesian equilibrium;
Consider a Bayesian collective decision problem in which the preferences of agents are private information. We provide a general demonstration that the utility costs associated with incentive constraints become negligible when the decision problem is linked with a large number of independent copies of itself. This is established by defining a mechanism in which agents must budget their representations of preferences so that the frequency of preferences across problems mirrors the underlying distribution of preferences, and then arguing that agents' incentives are to satisfy their budget by being as truthful as possible. We also show that all equilibria of the linking mechanisms converge to the target utility levels. The mechanisms do not require transferable utility or interpersonal comparisons of utility, and are immune to manipulations by coalitions.