Utilitarian Mechanism Design for an Excludable Public Good

Abstract

This paper studies the design of optimal utilitarian mechanisms for an excludable public good. Excludability provides a basis for making people pay for admissions; the payments can be used for redistribution and/or funding. Whereas previous work assumed that admissions are governed by the payment or nonpayment of a price, this paper allows for arbitrary admission rules. With su¢ cient inequality aversion, nondegenerate randomization in admissions is shown to be desirable for certain model speci…cations, with and without participation constraints. The paper also gives a su¢ cient condition on the distribution of preferences under which randomization is undesirable.JEL Classi…cation: D61, D63, H21, H41