Implementation of uniform effort sharing schemes in dominant strategy equilibrium

Uniform effort sharing rules for tranfrontier pollution problems, like the popular equal percentage reduction arrangement, do not result in a cost efficient allocation of emission abatement efforts. In addition, they may violate voluntary participation constraints if the uniform effort level is decided upon by means of ordinary majority vote. In contrast to ordinary majority vote, we consider in this paper the so-called conservative mechanism by Moulin (1994), Rev. Econ. Studies 55, which picks the smallest revealed effort level in stead of the median. The conservative mechanism always respects a weak participation constraint. Moreover, it is coalitionally strategy proof meaning that no individual player, or group of players, can achieve a better outcome for themselves by misrepresenting its preferences for environmental quality. In order to remedy the cost inefficiency of the equal percentage arrangements, we propose to apply the conservative mechanism to the choice of a uniform emission tax rate. Simulations for greenhouse effect indicate that the latter mechanism might do considerably better than the traditional equal percentage arrangements. keywords: greenhouse effect, strategy proofness, transfrontier pollution problems ∗I would like to thank Erik Schokkaert for valuable comments on an earlier draft.