"Overprovision of Public Goods under Information Manipulations"
(joint with Dongsoo Shin and Roland Strausz)

Abstract :
In this paper, we consider provision of a public good for agents with private valuations. The principal can falsify the information she receives from one agent when she communicates with another one. In addition to satisfying the standard incentive compatibility and limited liability constraints of the agents, a feasible outcome should also give the principal the incentive not to manipulate information. We show that this consideration is the source of a new form of inefficiency which may lead to bunching the same public good level is produced for different valuations - and/or overproduction marginal cost of production is higher than the sum of the marginal values of the agents.