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Public-Good Provision with Many Participants

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  • Martin F. Hellwig

Abstract

For a nonexcludable public good with benefit and cost functions independent of the number of participants, this paper studies second-best allocations under Bayesian interim incentive compatibility and interim individual rationality. As the number of participants becomes large, second-best provision levels converge in distribution to first-best levels if the latter are bounded. Second-best provision levels become large in absolute terms but small relative to first-best levels if benefit and cost functions are isoelastic. In contrast, for an excludable public good, the ratio of second-best to first-best levels is bounded away from zero. Copyright 2003, Wiley-Blackwell.

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  • Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 589-614.
    • Handle: RePEc:oup:restud:v:70:y:2003:i:3:p:589-614
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00257
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    References listed on IDEAS

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