A new mechanism for the free-rider problem

Sujay Sanghavi, Bruce Hajek

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

The free-rider problem arises in the provisioning of public resources, when users of the resource have to contribute towards the cost of production. Selfish users may have a tendency to misrepresent preferences - so as to minimize individual contributions - leading to inefficient levels of production of the resource. Groves and Loeb formulated a classic model capturing this problem, and proposed (what later came to be known as) the VCG mechanism as a solution. However, in the presence of heterogeneous users and communication constraints, or in decentralized settings, implementing this mechanism places an unrealistic communication burden. In this paper we propose a class of alternative mechanisms for the same problem as considered by Groves and Loeb, but with the added constraint of severely limited communication between users and the provisioning authority. When these mechanisms are used, efficient production is ensured as a Nash equilibrium outcome, for a broad class of users. Furthermore, a natural bid update strategy is shown to globally converge to efficient Nash equilibria. An extension to multiple public goods with inter-related valuations is also presented.

Original languageEnglish (US)
Title of host publicationProceedings of ACM SIGCOMM 2005 3rd Workshop on the Economics of Peer-to-Peer Systems, P2PECON 2005
Pages122-127
Number of pages6
DOIs
StatePublished - Dec 1 2005
EventACM SIGCOMM 2005 3rd Workshop on the Economics of Peer-to-Peer Systems, P2PECON 2005 - Philadelphia, PA, United States
Duration: Aug 22 2005Aug 22 2005

Publication series

NameProceedings of ACM SIGCOMM 2005 3rd Workshop on the Economics of Peer-to-Peer Systems, P2PECON 2005

Other

OtherACM SIGCOMM 2005 3rd Workshop on the Economics of Peer-to-Peer Systems, P2PECON 2005
Country/TerritoryUnited States
CityPhiladelphia, PA
Period8/22/058/22/05

Keywords

  • Algorithms
  • Economics
  • G.1.6 [Optimization] Mechansim Design
  • Non-cooperative Games
  • Theory

ASJC Scopus subject areas

  • Control and Systems Engineering

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