Discussion paper

DP17142 Locally optimal transfer free mechanisms for border dispute settlement

IIndividuals living in a contested region are privately informed about their preference for citizenship in two rivalling countries. Not all borders are technically feasible which is why not everybody can live in his preferred country. Monetary transfers are not feasible. When citizens only care about their own citizenship and types are drawn independently, a simple mechanism with simultaneous binary messages implements a social choice function that maximizes the expected sum of local residents' payoffs. This mechanism selects a feasible allocation that maximizes the number of individuals who live in what they say is their preferred country. A strategically simple approval voting mechanism implements the same social choice function but does not require any knowledge about voters' location or the set of feasible outcomes. Sequential voting and electoral competition may instead lead to suboptimal outcomes.


Grüner, H (2022), ‘DP17142 Locally optimal transfer free mechanisms for border dispute settlement‘, CEPR Discussion Paper No. 17142. CEPR Press, Paris & London. https://cepr.org/publications/dp17142