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Abstract: This paper studies the problem of the provision of a public good in a commu-
nity, where citizens (or, agents) in the community have private valuations about the public
good. A public good provision mechanism, proposed by the government (or, the principal), is
a mapping from agents’ reported valuations to the decisions of whether to provide the public
good and also how to allocate the cost of the public good among agents should the public
good be provided. A key assumption of our model is that the principal faces a constitutional
constraint in the sense that in order for a mechanism to be implemented, the mechanism
must first be approved by agents under a prespecified voting rule. We find that as long as the
voting rule is not the unanimity rule, then the principal can design a mechanism such that
first-best efficiency of the provision of the public good is always achieved. We also consider
various constraints which may prevent our mechanism from proper functioning (such as the
prohibition of the use of discriminatory mechanisms, or the existence of interest groups and
vote buying). We discuss the optimal voting rule in such situations.
Keywords: Public goods; Voting; Efficiency.
JEL classification: D82, H41, D72 |
