A thought experiment on demand-revealing mechanisms

✍ Scribed by Howard Margolis

• Publisher: Springer US
• Year: 1982
• Tongue: English
• Weight: 291 KB
• Volume: 38
• Category: Article
• ISSN: 0048-5829
• DOI: 10.1007/bf00124630

✦ Synopsis

Demand-revealing mechanisms allow individuals to influence social choice subject to a special tax designed to elicit truthful revelation of preferences. Either directly (as in Tideman and Tullock, 1976; based on earlier work by E. C. Clarke) or indirectly (as in Groves and Ledyard, 1977), 1 the individual reports his willingness-to-pay for a marginal change in the budget. The relation between the resulting special tax and the voter's effect on the social choice is such that a rational, self-interested voter would find it in his interest to respond such that for any budget level, Q, his Lindahl price (the quantity that must be summed across taxpayers to locate the Lindahl-Samuelson budget choice) will be just the sum of his revealed willingness-to-pay at Q, plus his assigned tax price.