Proportional division in a planning procedure

Jan 1, 1991
By: Chakravorti B Journal of Comparative Economics 450 - 459
Abstract
A public good is produced by a firm using a private good owned by potential consumers. The firm's technology and the consumers' preferences are unobservable to the Central Planning Board (CPB). The CPB's objective is to design a planning procedure that (a) converges to a Pareto-efficient and individually rational allocation and (b) taxes each consumer in proportion to his/her true marginal benefits and re-distributes the dividend generated in proportion to the taxes he/she pays. We refer to such a division of the tax burden and the dividend as the proportional division rule. Given the simultaneous requirements of (a) and (b), there is a crucial incentive problem to be resolved. We show the existence of a planning procedure that retains the convergence properties and implements the proportional rule in myopic Nash equilibrium. © 1991.
Copy Citation Chakravorti, B. (1991). Proportional division in a planning procedure. Journal of Comparative Economics, 15(3), 450-459. doi:10.1016/0147-5967(91)90025-O Copied to clipboard.
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