Public Projects with Preferences and Predictions
Mary Monroe, Bo Waggoner
TL;DR
This work studies a public projects setting where a group must choose among alternatives using both participants’ private values and signals about external welfare. It introduces SQUAP, a two-stage mechanism that first aggregates information via wagering or prediction markets and then selects an outcome with a Quadratic Transfers Mechanism (QTM)-based vote, achieving strong Price of Anarchy guarantees. The authors extend QTM to incorporate external welfare and to operate with predictions, providing nonasymptotic PoA bounds for the two-alternative case and general PoA insights for more alternatives; they also show budget-balance properties and discuss practical variants to ease implementation. The framework combines information aggregation with welfare-maximizing decision rules, offering a principled approach to decisionmaking when participants serve as both forecasters and voters, with potential applications to policy design where externalities matter and forecasts can be refined over time. Overall, the paper contributes new mechanism-design tools for robust, incentive-aligned group choices that leverage predictions alongside preferences.
Abstract
When making a decision as a group, there are two primary paradigms: aggregating preferences (e.g. voting, mechanism design) and aggregating information (e.g. discussion, consulting, forecasting). Almost all formally-studied group decisionmaking mechanisms fall under one paradigm or the other, but not both. We consider a public projects problem with the objective of maximizing utilitarian social welfare. Decisionmakers have both preferences, modeled as utility functions over the alternatives; and information, modeled as Bayesian signals relevant to the alternatives' external welfare impact. Aligning incentives is highly challenging because, on the one hand, agents can provide bad information in order to manipulate the mechanism into satisfying their preferences; and on the other hand, they can misreport their preferences to favor selection of an alternative for which their information rewards are high. We propose a two-stage mechanism for this problem. The forecasting stage aggregates information using either a wagering mechanism or a prediction market (the mechanism is modular and compatible with both). The voting stage aggregates preferences, together with the forecasts from the previous stage, and selects an alternative by leveraging the recently-studied Quadratic Transfers Mechanism. We show that, when carefully combined, the entire two-stage mechanism is robust to manipulation of all forms, and under weak assumptions, satisfies Price of Anarchy guarantees. In the case of two alternatives, the Price of Anarchy tends to 1 as natural measures of the "size" of the population grow large. In most cases, the mechanisms achieve a balanced budget as well. We also give the first nonasymptotic Price of Anarchy guarantee for the Quadratic Transfers Mechanism, a result of independent interest.