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Justifying the Lindahl Solution as an Outcome of Fair Cooperation

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Author Info
Wolfgang Buchholz ()
Wolfgang Peters ()

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Abstract

The Lindahl equilibrium is mostly motivated by a rather artificial price mechanism. Even though the analogy to a competitive market has been emphasised by Lindahl himself his approach does not directly explain the normative ideas, which are behind this concept. In the present paper we therefore show how the Lindahl equilibrium can be deduced from some simple equity axioms that in particular are related to the equal sacrifice principle and a non-envy postulate as norms for distributional equity. Fairness among agents with different preferences is taken into account by considering their marginal willingnesses to pay as virtual prices. In this way it might also become more understandable why the Lindahl solution can be perceived as an outcome of fair cooperation.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1536.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1536

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Related research
Keywords: public goods; Lindahl equilibrium; fairness; equity;

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Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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Cited by:
(explanations, 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.)

  1. 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. [Downloadable!] (restricted)
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