Locating Two Public Bads in an Interval

Abstract

Public bads are facilities that are necessary for the whole society, but unfortunately, entail negative externalities for the social-economic welfare in the surrounding areas. The main objective of the present thesis is to find optimal locations of two public bads in a region given the preferences of two agents located there. Based on lexmin preference as the joint preference of each of the agents for locating pairs of public bads, the present thesis has defined and proved eleven lemmas determining the implications of strategy-proofness, anonymity and unanimity properties on the decision rule. As an extension to the traditional approach, this thesis has determined complete characterization of a set of strategy-proof, anonymous and unanimous rules, and shows that combination of these properties allows for inner solutions for optimal locations of two public bads in an interval given the preferences of the agents in the region.