The Demand Revealing Process: To Distribute the Surplus

Contrary to the established, frequently repeated proposition that its budget surplus cannot be distributed to taxpayers without disturbing the incentive compatibility of the demandrevealing process (DRP), the surplus can be distributed by reapplying the key concept of the DRP. There will remain an aggregate refund error that in a Bayesian sense is random with zero mean, and which vanishes O(1/N)² as the economy becomes large through replication. To deal with income effects, when one does not restrict the domain of the mechanism to separable utility functions, I suggest a variation of the DRP that preserves its incentive compatibility when N is finite.