Incentive compatibility and individual rationality in public good economies

Abstract

Hurwicz's theorem states that Pareto optimality, individual rationality, and incentive compatibility are inconsistent in a class of private goods economies. A similar result is obtained by Ledyard and Roberts in a class of public good economies. Hurwicz and Walker show that generically there are no incentive compatible and Pareto optimal mechanisms in a class of both private and public goods economies. Without imposing Pareto optimality, this paper explores the possiblity of the existence of incentive compatible and autarkically individually rational mechanisms in a class of public good economies. Autarkic individual rationality, which strengthens individual rationality in a natural way, and incentive compatibility are shown to be inconsistent.