A note on the stability of Chen’s Lindahl mechanism |
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| Authors: | Matt Van Essen |
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| Institution: | 1.Department of Economics, Finance, and Legal Studies,University of Alabama,Tuscaloosa,USA |
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| Abstract: | There are no general theoretical results on the stability of the Lindahl mechanism introduced by Chen (Econ Theory 19:773–790,
2002). We show that despite not fitting the requirements of the Milgrom and Roberts 1990 stability result for supermodular games,
if the Chen mechanism induces a supermodular game, then the best reply map is a contraction. This gives us an easy to identify
sufficient condition for dynamic stability of equilibrium. |
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