NASH-IMPLEMENTATION OF THE LINDAHL CORRESPONDENCE WITH DECREASING RETURNS TO SCALE TECHNOLOGIES

This paper considers the problem of designing ''well-behaved'' mechani sms whose Nash allocations coincide with Lindahl allocations in the pr esence of decreasing returns to scale (DRS) technologies. The mechanis m presented here is individually feasible, balanced, continuous, and d ifferentiable around Nash equilibria. Further, the mechanism has a mes sage space of minimal dimension. Moreover we show that, in contrast to mechanisms dealing with constant returns to scale, an important chara cteristic of mechanisms implementing the Lindahl correspondence with D RS technologies is that at least one individual's personalized prices depend on his own messages, provided the mechanisms are balanced and s mooth.