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"Almost" subsidy-free spatial pricing in a multi-dimensional setting

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  • Drèze, Jacques
  • Le Breton, Michel
  • Savvateev, Alexei
  • Weber, Shlomo

Abstract

Consider a population of citizens uniformly spread over the entire plane. The population faces a problem of locating public facilities financed by its users, who face an idiosyncratic private access cost to the facility. We show that, under mild assumptions, an external intervention that covers a tiny portion of the facility cost is sufficient to guarantee secession-proofness or no cross-subsidization, where no group of individuals is charged more than the cost incurred if it had acted on its own. Moreover, we demonstrate that in this case the Rawlsian access pricing is the only mechanism that rules out secession threats.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 143 (2008)
Issue (Month): 1 (November)
Pages: 275-291

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Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:275-291

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Secession-proofness Optimal jurisdictions Rawlsian allocation Hexagonal partition Cross-subsidization;

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References

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  1. Anna Bogomolnaia & Michel Breton & Alexei Savvateev & Shlomo Weber, 2008. "Stability of jurisdiction structures under the equal share and median rules," Economic Theory, Springer, Springer, vol. 34(3), pages 525-543, March.
  2. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1027-56, November.
  3. BOGOMOLNAIA, Anna & LE BRETON, Michel & SAVVATEEV, Alexei & WEBER, Shlomo, 2006. "Stability under unanimous consent, free mobility and core," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Bollobas, Bela & Stern, Nicholas, 1972. "The optimal structure of market areas," Journal of Economic Theory, Elsevier, Elsevier, vol. 4(2), pages 174-179, April.
  5. Konishi, Hideo & Le Breton, Michel & Weber, Shlomo, 1998. "Equilibrium in a Finite Local Public Goods Economy," Journal of Economic Theory, Elsevier, Elsevier, vol. 79(2), pages 224-244, April.
  6. Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, Elsevier, vol. 18(2), pages 328-348, August.
  7. Wooders, Myrna, 1980. "The Tiebout Hypothesis: Near Optimality in Local Public Good Economies," Econometrica, Econometric Society, Econometric Society, vol. 48(6), pages 1467-85, September.
  8. Guesnerie Roger & Oddou Claude, 1979. "Second best taxation as a game," CEPREMAP Working Papers (Couverture Orange) 7919, CEPREMAP.
  9. Haimanko, Ori & Le Breton, Michel & Weber, Shlomo, 2004. "Voluntary formation of communities for the provision of public projects," Journal of Economic Theory, Elsevier, Elsevier, vol. 115(1), pages 1-34, March.
  10. Casella, Alessandra, 2001. "The Role of Market Size in the Formation of Jurisdictions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(1), pages 83-108, January.
  11. Stern, Nicholas, 1972. "The optimal size of market areas," Journal of Economic Theory, Elsevier, Elsevier, vol. 4(2), pages 154-173, April.
  12. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(4), pages 625-41, June.
  13. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, Elsevier, vol. 38(1), pages 101-117, February.
  14. Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 4.
  15. Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, Elsevier, vol. 14(1), pages 84-112, February.
  16. Guesnerie, Roger & Oddou, Claude, 1988. " Increasing Returns to Size and Their Limits," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 90(3), pages 259-73.
  17. Weber, Shlomo & Zamir, Shmuel, 1985. "Proportional taxation: Nonexistence of stable structures in an economy with a public good," Journal of Economic Theory, Elsevier, Elsevier, vol. 35(1), pages 178-185, February.
  18. Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(2), pages 393-413, April.
  19. Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 164, Institut d'Économie Industrielle (IDEI), Toulouse.
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Citations

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Cited by:
  1. Dahm, Matthias, 2009. "Free Mobility and Taste-Homogeneity of Jurisdiction Structures," Working Papers 2072/15809, Universitat Rovira i Virgili, Department of Economics.
  2. Camelia Bejan & Juan Gómez, 2009. "Core extensions for non-balanced TU-games," International Journal of Game Theory, Springer, Springer, vol. 38(1), pages 3-16, March.
  3. Savvateev, A., 2013. "Coalitional Stability of a "Bipolar World"," Journal of the New Economic Association, New Economic Association, New Economic Association, vol. 17(1), pages 10-43.
  4. Michel Le Breton & Juan D. Moreno-Ternero & Alexei Savvateev & Shlomo Weber, 2010. "Stability and Fairness in Models with a Multiple Membership," Working Papers, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center 2010-10, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  5. Philippe De Donder & Michel Le Breton & Eugenio Peluso, 2012. "On the (sequential) majority choice of public good size and location," Social Choice and Welfare, Springer, Springer, vol. 39(2), pages 457-489, July.

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