I am grateful to Mark Walker, John Wooders, Martin Dufwenberg, P. J. Healy, Rabah Amir, an editor, an associate editor, and two anonomous referees for their helpful comments.
A Simple Supermodular Mechanism that Implements Lindahl Allocations
Article first published online: 13 MAR 2013
© 2013 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 15, Issue 3, pages 363–377, June 2013
How to Cite
VAN ESSEN, M. J. (2013), A Simple Supermodular Mechanism that Implements Lindahl Allocations. Journal of Public Economic Theory, 15: 363–377. doi: 10.1111/jpet.12028
- Issue published online: 2 MAY 2013
- Article first published online: 13 MAR 2013
- Accepted manuscript online: 7 JAN 2013 04:41AM EST
- Manuscript Accepted: 25 JUN 2011
- Manuscript Received: 12 MAY 2010
This paper introduces a new incentive-compatible mechanism which, for general preference environments, implements Lindahl allocations as Nash equilibria. We provide an example that having a mechanism induce a supermodular game is not typically sufficient to guarantee dynamic stability of equilibrium. However, for the new mechanism, inducing a supermodular game guarantees that the best reply mapping is a contraction. Thus, this new mechanism provides a connection between the desirable welfare properties of Lindahl allocations and the theoretical/convergence properties of games whose best reply mappings are a contraction.