This chapter examines decision making by a community (or any group) in a simple model: The community must choose from a finite set of mutually exclusive alternatives. (The next chapter endows the model with much more structure by specifying individual utility functions and a production function—and resource constraints. The utility functions will have classical economic properties.)

We look at situations in which a group must make a decision that will be binding on all of its members. For example, a class has to determine a time for a review session, a town has to decide whether to build a new school, a nation has to elect a legislature. The resulting choice will have no other implications for personal consumption—in this chapter. Think of the alternatives X, Y, Z, and so forth from which a choice is to be made as alternative ways of spending a fixed amount of government revenue, with the same individual tax burdens in each case. In this setting we can't rule out any ranking of the available options as a possible preference scheme for a member of the group. This makes it very difficult to induce truthful revelation of the hidden characteristic, which in this chapter and the next is the individual's true preference scheme. We want the individuals to reveal enough information about their preferences to enable the system to select the outcome that best reflects those individual preferences.