The Linking of Collective Decisions and Efficiency

For groups that must make several decisions of similar form, we define a simple and general mechanism that is designed to promote social efficiency. The mechanism links the various decisions by forcing agents to budget their representations of preferences so that the frequency of preferences across problems conforms to the underlying distribution of preferences. We show that as the mechanism operates over a growing number decisions, the welfare costs of incentive constraints completely disappear. In addition, as the number of decisions being linked grows, a truthful strategy is increasingly successful and secures the efficient utility level for an agent. ∗Jackson is at the Division of the Humanities and Social Sciences, California Institute of Technology, Pasadena, California 91125, USA, http://www.hss.caltech.edu/∼jacksonm/Jackson.html, email: [email protected] , and Sonnenschein is at the Department of Economics, University of Chicago, 1126 E. 59th Street, Chicago, IL 60637, USA, email: [email protected]. Financial support under NSF grant SES-9986190 is gratefully acknowledged, as is support from the University of Chicago where Jackson was visiting when this research began. We thank Bill Zame and the participants of SWET 2003 for helpful comments.