Tensions in Practice: Truthful project prices need not fund the project¶
A toy shared project costing 10
A project costs 10 and, if built, benefits both A and B without either person’s use reducing the other’s. Compare two declared funding rules. An individual-price rule builds when reported values sum to at least 10, then charges each person the cost not covered by the other’s report, with a floor of zero. An equal-share rule instead asks each person to accept a payment of 5 and builds only if both agree. Inspect two separate true-value profiles: 6 and 6, or 4 and 8.
Act on the total reported value
Use individual critical prices that align each person’s build decision with truthful reporting under the specified model.
Fund the cost from consenting users
Require the two users’ accepted payments to cover the full 10 without an outside subsidy.
Why these aims pull against each other
The individual critical payments can sum to less than the project cost even when the total value justifies provision. Equal shares cover the cost when accepted, but can stop a project whose total value exceeds cost.
Choose an arrangement to see what changes and what remains difficult.
A / B pay lists the two actual payments. Subsidy is the outside funding needed in addition to those payments. Built? says whether the project exists; a No row charges nobody. Values 6 / 6 and 4 / 8 are separate declared profiles, not reports caused by the rule.
What this choice protects
What it costs
When it fits
Compare the arrangements
Individual critical prices
Build when the reports sum to at least 10. If built, A pays max(0, 10 − B’s report) and B pays max(0, 10 − A’s report); otherwise nobody pays. An outside fund supplies any gap. Under truthful reports both displayed projects are built.
| A / B pay | Subsidy | Built? | |
|---|---|---|---|
| Values 6 / 6 | 4 / 4 | 2 | Yes |
| Values 4 / 8 | 2 / 6 | 2 | Yes |
- What it protects
- Each person’s price, conditional on building, does not increase with their own report. Under private values and value-minus-payment payoffs, the build threshold matches whether the project is individually worth that price.
- What it costs
- Payments total 8 in both displayed profiles, so an outside fund must supply 2. This provision rule is not self-financing in these cases.
- When it fits
- Plausible when an authorized outside fund can cover the deficit and eliciting total value is worth the reporting and funding machinery.
Illustration note: This is an editorial, deliberately bounded illustration. Its stated rules and any numbers are invented, not observations, recommended settings, or predictions.
Equal voluntary shares
Ask both participants to commit 5, payable only if both agree and the project is built. At values 6 and 6 both accept. At values 4 and 8, A declines; the commitments lapse and nobody is charged.
| A / B pay | Subsidy | Built? | |
|---|---|---|---|
| Values 6 / 6 | 5 / 5 | 0 | Yes |
| Values 4 / 8 | 0 / 0 | 0 | No |
- What it protects
- Every project built by this rule is fully funded by the two consenting users, with no outside subsidy.
- What it costs
- The 4 / 8 project is not built despite total value 12 exceeding cost 10; the equal payment would exceed A’s own value.
- When it fits
- Plausible when outside funding is unavailable and equal voluntary shares are the chosen financing contract, accepting the resulting missed provision.
Illustration note: This is an editorial, deliberately bounded illustration. Its stated rules and any numbers are invented, not observations, recommended settings, or predictions.
What this illustration does—and does not—establish
The source establishes the structural tension; the concrete alternatives and their conditional costs are editorial synthesis. No arrangement is a universal recommendation.
- Costs, values and rules are invented. Participants have nonnegative private values, payoff equals value received minus payment, reports do not change others’ values, and the outside fund is committed to cover the first rule’s deficit.
- The individual-price rule is the two-person fixed-cost pivot-payment example. Conditional payment is independent of the person’s own report; a report changes only whether the build threshold is met. This establishes the stated individual incentive, not coalition-proofness.
- The equal-share rule elicits acceptance of a price rather than a complete valuation. It can have individually sensible acceptance behavior while missing some positive-total-surplus projects.
- No claim is made that every truthful mechanism runs a deficit, that these two rules exhaust the design space, or that a general impossibility theorem follows from two profiles. The outside subsidy is a real resource burden, not free surplus.
Source entries
Mechanism Design
Mechanism design Designer Objective vs Implementability Bounds supplies the local tension. The setting, alternative arrangements, and stipulated consequences are editorial applications.
Designer Objective vs Implementability Bounds
The designer typically wants several properties at once — allocative efficiency, individual rationality, incentive compatibility, budget balance.
Public Goods
Public Goods defines the shared benefit whose provision must be financed. It does not supply the invented prices or certify a preferred funding rule.
Non-excludable and non-rival benefit
Public Goods are resources or services characterized by two joint properties: *non-excludability* (once provided, users cannot be practically prevented from consuming them) and *non-rivalry* (one person's consumption does not diminish the quantity or quality available to others).