Efficiency and exclusion in collective action allocations

Suppose that a group of people meet to determine the cost allocation of a collective action, and that each individual’s valuation of the collective action is private and independent of all others’ values. With this information structure there is an incentive problem—each individual has an incentive to understate value in order to lower his or her cost share of the collective action. This paper examines exclusion from the benefits of a collective action as a tool to reduce the incentive to understate value in collective action negotiations. We (i) identify conditions for which an auction-like mechanism approaches classical ex post efficiency for the allocation of an excludable public good, (ii) characterize ex ante optimal allocation mechanisms, and (iii) identify conditions for which Ramsey pricing is ex ante optimal.  1997 Elsevier Science B.V.