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Incomplete contracts and excludable public goods

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  • Bierbrauer, Felix J.
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    Abstract

    We study whether a firm that produces and sells access to an excludable public good should face a self-financing requirement, or, alternatively, receive subsidies that help to cover the cost of public-goods provision. The main result is that the desirability of a self-financing requirement is shaped by an equity-efficiency trade-off: while first-best efficiency is out of reach with such a requirement, its imposition limits the firm's ability of rent extraction. Hence, consumer surplus may be higher if the firm has no access to public funds.

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    File URL: http://www.sciencedirect.com/science/article/pii/S004727271000188X
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 7 ()
    Pages: 553-569

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    Handle: RePEc:eee:pubeco:v:95:y:2011:i:7:p:553-569

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Incomplete contracts; Excludable public goods; Regulation;

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    References

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    1. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    11. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-30, July.
    12. Felix Bierbrauer, 2009. "On the legitimacy of coercion for the financing of public goods," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2009_15, Max Planck Institute for Research on Collective Goods.
    13. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    15. Felix Bierbrauer, 2009. "On the Legitimacy of Coercion for the Financing of Public Goods," CESifo Working Paper Series 2663, CESifo Group Munich.
    16. Schmitz, Patrick W., 1997. "Monopolistic Provision of Excludable Public Goods under Private Information," MPRA Paper 6549, University Library of Munich, Germany.
    17. Felix Bierbrauer, 2009. "On the Legitimacy of Coercion for the Financing of Public Goods," Working Papers 2009.98, Fondazione Eni Enrico Mattei.
    18. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
    19. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
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