Voluntary Auctions for Noxious Facilities: Incentives to Participate and the Efficiency of Siting Decisions |
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| Institution: | 1. School of Materials Science and Engineering, State Key Laboratory of New Ceramics and Fine Processing, Tsinghua University, Beijing 100084, China;2. Center for Nano and Micro Mechanics, Tsinghua University, Beijing 100084, China;3. National Center for Nanoscience and Technology, Zhongguancun, Beijing 100190, China;4. Department of Physics and Institute for Advanced Study, Nanchang University, Nanchang 330031, China;5. School of Materials Science and Engineering, Northwestern Polytechnical University, Xi’an 710072, China;6. Department of Mechanical Engineering, University of Delaware, Newark, DE 19716, USA;1. Department of Chemical and Biomolecular Engineering, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong;2. Department of Chemical Engineering, University of Delaware, Newark, DE 19716, USA;3. Division of Environment, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong;1. INRS-Institut Armand-Frappier, Institut National de la Recherche Scientifique, Laval, Canada;2. Laboratory of Biochemical Neuroendocrinology, Institut de Recherches Cliniques de Montréal, Affiliated to the Université de Montréal, Montréal, Canada;1. School of Economics and Management, Changchun University of Science and Technology, No.7989 Weixing Road, Changchun, Jilin 130012, China;2. Business School, Jilin University, No.2699 Qianjin Street, Changchun, Jilin 130012, China;3. College of Management, National Dong Hwa University, No.1, Sec.2, Da Hsueh Road, Shoufeng District, Hualien 97401, Taiwan |
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| Abstract: | This paper explores the efficiency properties of a voluntary auction under which the city submitting the low bid hosts the region′s noxious facility and receives the high bid as compensation. In the Nash equilibrium of the auction game, the auction mechanism is individually rational (participation is rational for all values of the local environmental costs of the facility), incentive-compatible (the facility is located in the low-cost city), and revenue-neutral. If the compensation of the host city distorts location choices, participation in the auction is rational for all values of local environmental costs if the scale economies associated with the noxious facility are large relative to the average local environmental cost and the distortionary cost per dollar of compensation. |
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