The Linking of Collective Decisions Leads to Efficiency

For groups that must make several decisions of a 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 of decisions, the welfare costs of incentive constraints completely disappear, and this is true of all equilibria. 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 grants SES-9986190 and SES-0316493 is gratefully acknowledged, as is support from the University of Chicago where Jackson was visiting when this research began. We thank Zachary Cohn, Mahmut Erdem, Robert Veszteg, Bill Zame and the participants of various seminars for helpful comments and suggestions.