Serial Cost-Sharing of Excludable Public Goods

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Abstract
Under the “Conservative Equal costs” mechanism to produce a non-excludable (one-dimensional) public good, each agent reports his demand. The lowest reported demand of public good is produced and its cost is shared equally among all agents. When the cost of producing the public good is convex, this mechanism is strategy-proof (even with respect to coalitions), anonymous and induces voluntary participation. No other mechanism shares these three properties. When the public good is excludable (its cost still convex), there is a mechanism with the same properties, that everyone prefers to conservative equal costs. This mechanism excludes the agent with the lowest (equal costs) demand from consuming (or paying for) a larger amount of the good, ameliorating the free-rider problem.

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