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 |
