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Incomplete contracts and excludable public goods

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  • Bierbrauer, Felix J.

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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  • Bierbrauer, Felix J., 2011. "Incomplete contracts and excludable public goods," Journal of Public Economics, Elsevier, vol. 95(7), pages 553-569.
    • Handle: RePEc:eee:pubeco:v:95:y:2011:i:7:p:553-569
    DOI: 10.1016/j.jpubeco.2010.11.028
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    Cited by:

    1. Bierbrauer Felix J., 2016. "Effizienz oder Gerechtigkeit?," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(1), pages 2-24, April.
    2. Felix Bierbrauer, 2016. "Effizienz oder Gerechtigkeit? Ungleiche Einkommen, ungleiche Vermögen und die Theorie der optimalen Besteuerung," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2016_03, Max Planck Institute for Research on Collective Goods.

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    More about this item

    Keywords

    Incomplete contracts; Excludable public goods; Regulation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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