Implementing the Lindahl voluntary-exchange mechanism

This paper analyzes a two-stage game for implementing Lindahl's voluntary-exchange mechanism. The game is based on a model of matching behavior suggested by Guttman (1978). Both the price and the quantities purchased of the public good are individualized, and Lindahl prices emerge endogenously in the first stage of the game. It is shown that any perfect equilibrium with a positive provision of the public good is a Lindahl equilibrium. There might also exist nonprovision perfect equilibria that are Pareto dominated by Lindahl equilibria with positive provision of the public good.