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The Role of Prices on Excludable Public Goods

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  • Sören Blomquist
  • Vidar Christiansen

Abstract

When a poublic good ist excludable it is possible to charge individuals for using the good. We study the role of prices onexcludable public goods using an extension of the Stiglitz-Sternversion of the Mirrlees optimal income tax model. Our discussionincludes both the case where the public good is a final consumergood and the case where it is an intermediate good.We demonstrate that for a public consumer good charging apositive price may be desirable, but only under certain conditions.However, charging a lower than optimal price may be less efficientthan setting a zero price. Conditions are identified under which consumers should be rationed in their demand rather thanadjusting demand to price. We also conclude that producers using an intermediate public good as input should not be charged a positive price.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 536.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_536

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Keywords: excludable public goods; public sector pricing; information constrained Pareto efficiency;

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References

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  1. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
  2. Fraser, Clive D., 1996. "On the provision of excludable public goods," Journal of Public Economics, Elsevier, vol. 60(1), pages 111-130, April.
  3. Eskeland, Gunnar S., 2000. "Environmental protection and optimal taxation," Policy Research Working Paper Series 2510, The World Bank.
  4. Sören Blomquist & Vidar Christiansen, 2001. "The Role of Prices on Excludable Public Goods," CESifo Working Paper Series 536, CESifo Group Munich.
  5. Brito, Dagobert L & Oakland, William H, 1980. "On the Monopolistic Provision of Excludable Public Goods," American Economic Review, American Economic Association, vol. 70(4), pages 691-704, September.
  6. Burns, Michael E & Walsh, Cliff, 1981. "Market Provision of Price-excludable Public Goods: A General Analysis," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 166-91, February.
  7. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  8. Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
  9. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-78, August.
  10. Oakland, William H, 1974. "Public Goods, Perfect Competition, and Underproduction," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 927-39, Sept./Oct.
  11. Joseph E. Stiglitz, 1982. "Self-Selection and Pareto Efficient Taxation," NBER Working Papers 0632, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Sören Blomquist & Vidar Christiansen, 2001. "The Role of Prices on Excludable Public Goods," CESifo Working Paper Series 536, CESifo Group Munich.
  2. Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  3. Bernd Huber & Marco Runkel, 2004. "Tax Competition, Excludable Public Goods and User Charges," CESifo Working Paper Series 1172, CESifo Group Munich.
  4. Gilbert E. Metcalf & Jongsang Park, 2005. "A Comment on the Role of Prices for Excludable Public Goods," Discussion Papers Series, Department of Economics, Tufts University 0524, Department of Economics, Tufts University.
  5. Martin Hellwig, 2004. "Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2004_14, Max Planck Institute for Research on Collective Goods.

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