Lindahl Equilibrium Versus Voluntary Contribution to a Public Good: The Role of the Income Distribution
AbstractLindahl equilibria are often seen as an ideal outcome of cooperation in a public-goods economy. But it has also been observed that, if no transfer payments are possible, the Lindahl equilibrium may not be Pareto-superior to the Nash outcome of the voluntary-contribution game. We derive conditions under which agents (or countries in the case of an international public good) will prefer the Lindahl over the Nash solution. In particular we show that rich agents in general are better off in the Lindahl equilibrium than in the voluntary-contribution equilibrium. When the exogenously given income distribution is not skewed too much or the original economy is replicated sufficiently often, all agents will gain by the move from the Nash to the Lindahl outcome. The underlying effects are related to the famous exploitation of the rich by the poor countries occurring in Nash equilibrium (which follows from Warr neutrality) and the fact that the underprovision of the public good in Nash equilibrium is particularly serious in large economies. Finally, we tentatively discuss some potential applications concerning international cooperation on global public-good provision.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 62 (2006)
Issue (Month): 1 (March)
Contact details of provider:
Web page: http://www.mohr.de/fa
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Pittel, Karen & Rübbelke, Dirk T. G., 2012.
"Transitions in the negotiations on climate change: From prisoner’s dilemma to chicken and beyond,"
Munich Reprints in Economics
19343, University of Munich, Department of Economics.
- Karen Pittel & Dirk Rübbelke, 2012. "Transitions in the negotiations on climate change: from prisoner’s dilemma to chicken and beyond," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(1), pages 23-39, March.
- Wolfgang Buchholz & Wolfgang Peters, 2007.
"Equal Sacrifice and Fair Burden Sharing in a Public Goods Economy,"
CESifo Working Paper Series
1997, CESifo Group Munich.
- Wolfgang Buchholz & Wolfgang Peters, 2008. "Equal sacrifice and fair burden-sharing in a public goods economy," International Tax and Public Finance, Springer, vol. 15(4), pages 415-429, August.
- Wolfgang Buchholz & Richard Cornes & Wolfgang Peters, 2008. "Existence, uniqueness and some comparative statics for ratio and Lindahl equilibria," Journal of Economics, Springer, vol. 95(2), pages 167-177, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.