Lindahl vs. Lindahl: Optimal siting and sizing of a noxious facility

Research output: Working paper


Providing a noxious facility poses two problems previously unexplored together: where to locate it and how large it should be. We propose a mechanism combining some market-like properties with a modified second-price auction. The mechanism selects a host, a facility size, a compensation for hosting the project, and determines how the compensation and building costs are split among the non-hosts. Regardless of the selected host, any equilibrium outcome of this mechanism is a Lindahl allocation. If each community bids truthfully for becoming the host–a strategy which no community has incentives to deviate–the selected Lindahl allocation is globally optimal.
Original languageEnglish (US)
Number of pages34
StatePublished - Oct 2020


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