On Incentive Compatibility and Budget Balancedness in Public Decision Making

Holstroem (1979) showed that Groves' schemes are the unique incentive compatible transfer schemes for public decision making problems if the domain of preferences is smoothly connected. In this paper we will show that this result can be extended to public decision making problems with a connected domain of preferences and a finite number of alternatives. Moreover, we give a class of decision making problems for which a budget balanced Groves' scheme exists. Finally, we show that for this particular class a budget balanced and incentive compatible transfer scheme cannot satisfy a specific individual rights property.