Template-Type: ReDIF-Paper 1.0 Author-Name: Sarvesh Bandhu Author-Name-First: Sarvesh Author-Name-Last: Bandhu Author-Email: Author-Workplace-Name: Indian Institute of Management, Bangalore Author-Name: Ratul Lahkar Author-Name-First: Ratul Author-Name-Last: Lahkar Author-Email: Author-Workplace-Name: Ashoka University Title: A Large Population Approach to Implementing Efficiency with Minimum Inequality Abstract: We consider the implementation of efficiency with minimum inequality in a large population model of negative externalities. Formally, the model is one of tragedy of the commons with the aggregate strategy at the efficient state being lower than at the Nash equilibrium. A planner can restore efficiency by imposing an externality equivalent tax and then redistribute the tax revenue as transfers to lower inequality. We characterize the transfer vector that minimizes inequality at the efficient state subject to incentive compatibility and budget balance. We then construct a mechanism that implements efficiency with minimum inequality in dominant strategies. We also show that minimizing inequality at the efficient state maximizes the minimum payoff at efficiency. But it is not equivalent to implementing the Rawlsian social choice function. length: 28 Creation-Date: 20220315 Revision-Date: Publication-Status: File-URL: https://dp.ashoka.edu.in/ash/wpaper/paper76_0.pdf File-Format: Application/pdf Number: 76 Handle: RePEc:ash:wpaper:76