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Bargaining Over Public Goods

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Author Info

  • Julio Davila

    ()
    (Centre d'Economie de la Sorbonne. Paris School of Economics)

  • Jan Eeckhout

    ()
    (Department of Economics, University of Pennsylvania)

  • Cesar Martinelli

    ()
    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

In a simple public good economy, we propose a natural bargaining procedure whose equilibria converge to Lindahl allocations as the cost of bargaining vanishes. The procedure splits the decision over the allocation in a decision about personalized prices and a decision about output levels for the public good. Since this procedure does not assume price-taking behavior, it provides a strategic foundation for the personalized taxes inherent to the Lindahl solution to the public goods problem.

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Bibliographic Info

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0901.

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Length: 17 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:cie:wpaper:0901

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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Julio Davila & Jan Eeckhout, 2004. "Competitive Bargaining Equilibria," Cahiers de la Maison des Sciences Economiques b04067, Université Panthéon-Sorbonne (Paris 1).
  4. Harrington, Joseph Jr., 1989. "The advantageous nature of risk aversion in a three-player bargaining game where acceptance of a proposal requires a simple majority," Economics Letters, Elsevier, vol. 30(3), pages 195-200, September.
  5. Banks, Jeffrey S. & Duggan, John, 1999. "A Bargaining Model of Collective Choice," Working Papers 1053, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Thomson, William, 1999. " Economies with Public Goods: An Elementary Geometric Exposition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 139-76.
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