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The optimal supply of congested public goods for homogeneous and heterogeneous customers

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  • Tchai Tavor
  • Uriel Spiegel

Abstract

Impure public goods resulting from the congestion effect are discussed in the literature solely for the case of homogenous populations where consumers have identical demands. We extend this to include heterogeneous populations, where demands are rectangularly distributed. We compare the optimal values of the control variables (quantity of the public good and the number of users) for both homogeneous and heterogeneous populations, as well as the social optimum values for both cases. We distinguish between two kinds of congestion effects: (1) increased usage which negatively affects the individual consumer's utility, and (2) the affect is located on the supply side, i.e. higher production costs due to an increased number of users.

Suggested Citation

  • Tchai Tavor & Uriel Spiegel, 2016. "The optimal supply of congested public goods for homogeneous and heterogeneous customers," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(1), pages 103-130, February.
    • Handle: RePEc:taf:jitecd:v:25:y:2016:i:1:p:103-130
    DOI: 10.1080/09638199.2015.1040054
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    References listed on IDEAS

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    1. Birulin, Oleksii, 2006. "Public goods with congestion," Journal of Economic Theory, Elsevier, vol. 129(1), pages 289-299, July.
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    Cited by:

    1. Miloslav Machoň, 2017. "Global Public Goods: The Case for the Global Earth Observation System of Systems [Globální veřejný statek na příkladu Systému systémů globálního pozorování Země]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2017(3), pages 68-83.

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