Discussion Paper Details

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Title: A mechanism design approach to the Tiebout hypothesis

Author(s): Philippe Jehiel and Laurent Lamy

Publication Date: August 2015

Keyword(s): competing exchange platforms, competing mechanisms, endogenous entry, free riding, local public goods, mechanism design and Tiebout hypothesis

Programme Area(s): Industrial Organization

Abstract: We revisit the Tiebout hypothesis in a world in which agents may possess private information as to how they value the various public goods in the various locations, and jurisdictions are free to choose whatever mechanism to attract citizens possibly after making some investments. It is shown that efficiency can be achieved as a competitive equilibrium when jurisdictions seek to maximize local revenues but not necessarily when they seek to maximize local welfare. Limitations of the result are discussed.

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Bibliographic Reference

Jehiel, P and Lamy, L. 2015. 'A mechanism design approach to the Tiebout hypothesis'. London, Centre for Economic Policy Research.