Pigouvian taxes: A strategic approach

Abstract

This paper analyzes the problem of designing mechanisms to implement efficient solutions in economies with externalities. We provide two simple mechanisms implementing the Pigouvian Social Choice Correspondence in environments in which coalitions can be formed. Finally, we study economies in which agents are incompletely informed, and provide a mechanism that implements this social choice correspondence in Bayesian equilibrium.Pigouvian taxes, mechanism design, implementation