How Should A Public Good Be Provided? A Transaction Cost Approach
AbstractThis paper applies Coase's (1937) theory of the firm to study public good provision. It compares three methods of public good provision: (1) collective provision, where users organize themselves to jointly finance the public good which is produced by a specialized firm; (2) market provision without outsourcing, where a firm produces the public good and a private good, and sells them as a bundle; (3) market provision with outsourcing, where a firm produces a private good, outsources the public good, and sell them as a bundle. All three methods of public goods provision deal with the problem of non-excludability, but each is associated with different transaction costs, organization costs, and specialization economies. The best method is the one which achieves the optimum tradeoffs among transaction costs, organization costs, and specialization economies.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal Division of Labor & Transaction Costs.
Volume (Year): 03 (2011)
Issue (Month): 02 ()
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Web page: http://www.worldscinet.com/dltc/dltc.shtml
Other versions of this item:
- Wenli Cheng & Dingsheng Zhang, 2006. "How Should A Public Good Be Provided? A Transaction Cost Approach," Monash Economics Working Papers 09/06, Monash University, Department of Economics.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D - Microeconomics
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- F - International Economics
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- L - Industrial Organization
- O - Economic Development, Technological Change, and Growth
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Holcombe, Randall G, 1997. " A Theory of the Theory of Public Goods," The Review of Austrian Economics, Springer, vol. 10(1), pages 1-22.
- Coase, R H, 1974. "The Lighthouse in Economics," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 357-76, October.
- Alan J. Auerbach, 1986.
"The Theory of Excess Burden and Optimal Taxation,"
NBER Working Papers
1025, National Bureau of Economic Research, Inc.
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