COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1511

Overcoming Participation Constraints

Hanming Fang and Peter Norman

May 2005

In incomplete information environments with transferable utility, efficient outcomes are generally implementable unless interim or ex post participation constraints are imposed on the problem. In this paper we show that linking a sufficiently large number of independent but possibly unrelated social decisions, a slightly perturbed Groves mechanism can implement an efficient outcome with probability arbitrarily close to one, while respecting all participation, incentive and balanced budget constraints.

Keywords: Linking, Participation constraints, Perturbed groves mechanism

JEL Classification: D61, D82, H41