Public Goods with Congestion: A Mechanism Design Approach

I consider the problem of the efficient provision of a public good with congestion in a setting with asymmetric information. I show, in particular, that when congestion is taken into account, in a wide class of economies it is possible to construct an incentive compatible mechanism that always produces the good at the efficient level, balances the budget and satisfies voluntary participation constraints. This result is in contrast with the corresponding impossibility result for pure public goods due to Mailath and Postlewaite (1990) and Rob (1989)