Local Public Good Provision in Networks: A Nash Implementation Mechanism

In this paper we study local public goods provision in decentralized information networks. Local public goods are network users’ actions that directly affect the utilities of arbitrary subsets of network users. We consider networks where each user knows only that part of the network that either affects it or is affected by it. Furthermore, each user’s utility and action space are its private information, and each user is a self utility maximizer. For such a network we formulate a local public goods provision problem in the framework of implementation theory. For this problem we develop a game form that, (i) results in optimum centralized local public goods provision at all Nash equilibria of the induced game (Nash implementation); (ii) leads to voluntary participation by all users (individual rationality); and (iii) results in budget JEL codes: D85, D51, D62, D82, D61, C72 ∗Corresponding author Present address: Yahoo Labs, EGL, Inner Ring Road, Bangalore, India, 560071 Phone: +91-80-30774815; Fax: +91-80-30505504 Abbreviations: Nash equilibria (NE); Guaranteed display (GD); Base Station (BS); Code Division Multiple Access (CDMA); Minimum Mean Square Error (MMSE); Multi-User Detector (MUD); Quality of Service (QoS); Power Spectral Density (PSD) Preprint submitted to Games and Economic Behavior September 12, 2010 balance at all Nash equilibria and off equilibrium.