A SOLUTION TO THE PROBLEM OF EXTERNALITIES WHEN AGENTS ARE WELL-INFORMED

Authors
VARIAN HR
Citation
Hr. Varian, A SOLUTION TO THE PROBLEM OF EXTERNALITIES WHEN AGENTS ARE WELL-INFORMED, The American economic review, 84(5), 1994, pp. 1278-1293
Citations number
24
Categorie Soggetti
Economics
Journal title
The American economic review → ACNP
ISSN journal
00028282
Volume
84
Issue
5
Year of publication
1994
Pages
1278 - 1293
Database
ISI
SICI code
0002-8282(1994)84:5<1278:ASTTPO>2.0.ZU;2-L
Abstract
I describe a class of simple two-stage mechanisms that implement effic ient allocations as subgame-perfect equilibria for economic environmen ts involving externalities. These mechanisms, known as compensation me chanisms, solve a wide variety of externalities problems including imp lementation of Lindahl allocations, regulation of monopoly, and effici ent solutions to the prisoner's dilemma.