Funding public projects: A Case for the Nash product rule
Florian Brandl (University of Bonn), Felix Brandt (Technische Universität München), Matthias Greger (Technische Universität München), Dominik Peters (University of Toronto), Christian Stricker (Technische Universität München) and Warut Suksompong (National University of Singapore)
GPI Working Paper No. 14-2021, published in Journal of Mathematical Economics
We study a mechanism design problem where a community of agents wishes to fund public projects via voluntary monetary contributions by the community members. This serves as a model for public expenditure without an exogenously available budget, such as participatory budgeting or voluntary tax programs, as well as donor coordination when interpreting charities as public projects and donations as contributions. Our aim is to identify a mutually beneficial distribution of the individual contributions. In the preference aggregation problem that we study, agents report linear utility functions over projects together with the amount of their contributions, and the mechanism determines a socially optimal distribution of the money. We identify a specific mechanism—the Nash product rule—which picks the distribution that maximizes the product of the agents’ utilities. This rule is Pareto efficient, and we prove that it satisfies attractive incentive properties: it spends each agent’s contribution only on projects the agent finds acceptable, and agents are strongly incentivized to participate.
Other working papers
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Why, if at all, should we object to economic inequality? Some central arguments – the argument from decreasing marginal utility for example – invoke instrumental reasons and object to inequality because of its effects…
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Many think that human extinction would be a catastrophic tragedy, and that we ought to do more to reduce extinction risk. There is less agreement on exactly why. If some catastrophe were to kill everyone, that would obviously be horrific. Still, many think the deaths of billions of people don’t exhaust what would be so terrible about extinction. After all, we can be confident that billions of people are going to die – many horribly and before their time – if humanity does not go extinct. …
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Industrialized countries have long seen relatively stable growth in output per capita and a stable labor share. AI may be transformative, in the sense that it may break one or both of these stylized facts. This review outlines the ways this may happen by placing several strands of the literature on AI and growth within a common framework. We first evaluate models in which AI increases output production, for example via increases in capital’s substitutability for labor…