VOTING AND LOTTERY DRAFTS AS EFFICIENT PUBLIC-GOODS MECHANISMS

This paper characterizes interim efficient mechanisms for public good production and cost allocation in a two-type environment with risk-neu tral, quasi-linear preferences and fixed-size projects, where the dist ribution of the private good, as well as the public goods decision, af fects social welfare. An efficient public good decision can always be accomplished by a majority voting scheme, where the number of ''YES'' votes required depends on the welfare weights in a simple way. The res ults are shown to have a natural geometry and an intuitive interpretat ion. We also extend these results to allow for restrictions on feasibl e transfer rules, ranging from the traditional unlimited transfers to the extreme case of no transfers. For a range of welfare weights, an o ptimal scheme is a two-stage procedure which combines a voting stage w ith a second stage where an even-chance lottery is used to determine w ho pays. We call this the ''lottery draft mechanism''. Since such a co st-sharing scheme does not require transfers, it follows that in many cases transfers are not necessary to achieve the optimal allocation. F or other ranges of welfare weights the second stage is more complicate d, but the voting stage remains the same. If transfers are completely infeasible, randomized voting rules may be optimal. The paper also pro vides a geometric characterization of the effects of voluntary partici pation constraints.