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Title:Contractual federalism and strategy-proof coordination PDF Logo
Authors:Loeper, Antoine
Issue Date:2008
Series/Report no.:Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1521
Abstract:This paper takes a mechanism design approach to federalism and assumes that local preferences are the private information of local jurisdictions. Contractual federalism is defined as a strategy-proof contract among the members of the federation supervised by a benevolent but not omniscient federal authority. We show that even if the size of the information to be elicited is minimal, the incentive compatibility constraint has a bite in terms of flexibility and welfare. Strategy-proof and efficient federal mechanisms are necessarily uniform. There exists inefficient and non-uniform strategy-proof mechanisms, but they are socially worse than non cooperative decentralization. Federal mechanisms which are neutral and robust to coalition manipulations are equivalent to voting rules on uniform policies.
Asymmetric Information
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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