M.Sc Thesis

M.Sc StudentGal-Ed Eran
SubjectPublic Goods, Egalitarian Taxation and Sequential Mechanisms
DepartmentDepartment of Applied Mathematics
Supervisor PROF. Rann Smorodinsky


Consider a situation with a public good that may be supplied.  We study the efficiency of supplying public goods in a budget balanced way, where the public good must be funded by the players.  A player may announce that he is interested or not interested in the public good (his private secret).

The market for public goods is one of the fundamental markets studied in economic theory.  The basic tension in this market is the utility derived from the supply of the public good versus the individual contribution.  This tension induces market failures in this setting.  Mechanism design has proven a powerful tool in understanding ways to get around basic market failures and the design of taxation schemes.  In this thesis we research the implications of a natural constraint on the taxation scheme for the supply of the public good - that of ex-post fairness, where agents with similar announcements must contribute similarly.

We introduce a simple 2 player model with incomplete information and compute the efficiency of various mechanisms in this model.  The main contribution of our work is to broaden the standard set of mechanisms and allow sequential mechanisms, where the central designer has a degree of freedom by which he can inform some agents about information elicited from other agents.  We characterize the most efficient mechanisms and show that in many cases they do not reduce back to the classical simultaneous case.