A new characterization of the Groves-Clarke mechanism

DOI10.1016/0165-1765(91)90030-OMaRDI QIDQ1189330zbMATH OpenFDO

Authors Tomas Sjöström

Publication date 26 September 1992

Published in Economics Letters (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/0165-1765(91)90030-O

zbMATH Keywords

Groves mechanismGroves-Clarke mechanismShapley value

Mathematics Subject Classification ID

Cooperative games (91A12) Social choice (91B14) Public goods (91B18)

Review text

Suppose a group of individuals must choose a public project from some feasible set. If preferences are quasi-linear, the so-called Groves mechanism [\textit{T. Groves}, Econometrica 41, 617-631 (1973; Zbl 0311.90002)] induces truthful revelation of preferences and recommends projects that maximize the sum of the individual valuations. Unfortunately, there is not much freedom to achieve distributional objectives within the class of Groves mechanisms [see \textit{J. R. Green} and \textit{J.-J. Laffont}, ``Incentives in public decision-making (1979; Zbl 0417.90001), ch. 4]. Nevertheless, there is a sense in which one particular Groves mechanism, the Groves-Clarke (pivotal) mechanism, is equitable: It taxes individuals according to the cost they impose on others. A closely related notion is the Shapley value, which rewards a player according to his contribution to the `worth' of each coalition. This note characterizes the Groves-Clarke mechanism as the Groves mechanism whose payoff vector is the Shapley value of a certain cooperative game with transferable utility. In this game, it is assumed that each coalition would operate some Groves mechanism if they had to choose a project on their own. The proof uses the remarkable potential approach due to \textit{S. Hart} and \textit{A. Mas-Colell} [in: The Shapley value. Essays in Honor of Lloyd S. Shapley, 127-137 (1989; Zbl 0708.90099)]. Earlier characterizations of the Groves-Clarke mechanism can be found in a paper of \textit{H. Moulin} [J. Publ. Econ. 31, 53-78 (1986)]. It may be noted that, in a private goods context the Vickrey auction can be characterized in a similar way. However, the Vickrey auction generates a deficit which would make it necessary to subsidize coalitions.

Recommendations

• A Shapley-based Groves mechanism: when the mechanism designer plays the \textit{wise man}
• Undominated Groves mechanisms
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• The participatory Vickrey-Clarke-Groves mechanism
• scientific article; zbMATH DE number 3650233

Cites work

• scientific article; zbMATH DE number 3650233 (Why is no real title available?)
• scientific article; zbMATH DE number 4164592 (Why is no real title available?)
• scientific article; zbMATH DE number 3078997 (Why is no real title available?)
• Incentives in Teams

Cited in

(13)

• Vickrey-Clarke-Groves mechanisms and perfect competition
• Vickrey-Clarke-Groves mechanisms in continuum economies. Characterization and existence
• Coalition-proof full efficient implementation
• Similarities in axiomatizations: equal surplus division value and first-price auctions
• A Shapley-based Groves mechanism: when the mechanism designer plays the \textit{wise man}
• The participatory Vickrey-Clarke-Groves mechanism
• Groves mechanisms and communication externalities
• scientific article; zbMATH DE number 3650233 (Why is no real title available?)
• Sequential pivotal mechanisms for public project problems
• A Clarke tax tâtonnement that converges to the Lindahl allocation
• Undominated Groves mechanisms
• On Groves mechanisms for costly inclusion
• A characterization of equilibria in the Groves-Ledyard mechanism

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