Soliciting Accurate Evaluations of Public Goods

Abstract

Among the many problems faced by policy makers in attempts to use public funds efficiently, none is more troublesome than that of inducing users of public goods to reveal their demand prices. The difficulty in attempts to solicit demand prices falls under the general rubric of the free-rider problem, and is manifest in the propensity of users to behave strategically when asked to reveal evaluations. Several preference revelation devices have been proposed to surmount this problem, but all of these schemes are seriously flawed. This article presents a device which overcomes some of the flaws contained in previous work. The preference revealing mechanism proposed here is a bidding mechanism which takes advantage of the commonly found trait of risk-aversion to discourage strategic revelations.

Get full access to this article

View all access options for this article.

References

Barnett

A. H.

Yandle

(1973) “Allocating environmental resources.” Public Finance 28, 1: 11–19.

Bohm

(1971) “An approach to the problem of estimating demand for public goods.” Swedish J. of Economics 73 (March): 55–66.

Buchanan

J. M.

(1973) “The institutional structure of externality.” Public Choice 14 (Spring). 69–82.

Clarke

E. H.

(1971) “Multipart pricing of public goods.” Public Choice 11 (Fall): 17–33.

Dreze

J. H.

De La Valle Pousin

(1971) “A Tatonnement process for public goods.” Rev. of Econ. Studies 38 (April): 133–150.

Greenberg

MacKay

Tideman

T. N.

(1977) “Some limitations of the Groves-Ledyard optimal mechanism.” Public Choice, Special Supplement 29-2 (Spring): 129–130.

Groves

Ledyard

(1977a) “Optimal allocation of public goods; a solution to the ‘free rider’ problem.” Econometrica 45 (May): 783–809.

Groves

Ledyard

(1977b) “Some limitations of demand-revealing processes.” Public Choice, Special Supplement 20-2 (Spring): 107–124.

Thompson

E. A.

(1965) “A pareto optimal group decision process.” Papers on Non-Market Decision Making 1: 133–140.

10.

Tideman

T. N.

(1972) “The efficient provision of public goods,” pp. 111–123 in Muskin

(ed.) Public Prices and Public Products. Washington, DC: Urban Institute.

11.

Tideman

T. N.

Tullock

(1976) “A new and superior process for making social choices.” J. of Pol. Economy 84 (December): 1145–1159.

12.

Tullock

(1977) “Practical problems and practical solutions.” Public Choice, Special Supplement 29-2 (Spring): 27–35.

13.

Wicksell

(1967) “A new principle of just taxation.” Finanztheoretische Untersuchungen, Jena. Reprinted in Musgrave

R. A.

Peacock

A. T.

(eds.) Classics in Theory of Public Finance. New York: MacMillan.