A mechanism design approach to allocating central government funds among regional development agencies
Kıbrıs, Özgür and Tapkı, İpek Gürsel (2014) A mechanism design approach to allocating central government funds among regional development agencies. Review of Economic Design, 18 (3). pp. 163-189. ISSN 1434-4742 (Print) 1434-4750 (Online)
Full text not available from this repository.
Official URL: http://dx.doi.org/10.1007/s10058-014-0160-7
To allocate central government funds among regional development agencies, we look for mechanisms that satisfy three important criteria: efficiency, (individual and coalitional) strategy proofness (a.k.a. dominant strategy incentive compatibility), and fairness. We show that only a uniform mechanism satisfies all three. We also show that all efficient and strategy proof mechanisms must function by assigning budget sets to the agencies and letting them freely choose their optimal bundle. In choosing these budget sets, the agencies’ private information has to be taken into account in a particular way. The only way to additionally satisfy a weak fairness requirement (regions with identical preferences should be treated equally) is to assign all agencies the same budget set, as does the uniform mechanism. Finally and maybe more importantly, we show that the central government should not impose constraints on how much to fund an activity (e.g. by reserving some funds only for a particular activity): otherwise, there are no efficient, strategy proof and fair mechanisms, no matter how small these constraints are.
Repository Staff Only: item control page