Discussion paper

DP17142 Locally optimal transfer free mechanisms for border dispute settlement

Individuals living in a contested region are privately informed about their preference for citizenship in two rivalling countries. Not all frontiers are technically feasible which is why not everybody can live in his preferred country. Monetary transfers are not possible. 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 picks a feasible allocation that maximizes the number of individuals who live in what they say is their preferred country. An approval voting mechanism reaches the same outcome but does not require knowledge about voters' location. Sequential voting and electoral competition may instead lead to suboptimal outcomes.

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Citation

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