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ÔAlmostÕ subsidy-free spatial pricing in a multi-dimensional setting

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Author Info
Jacques, DREZE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE) - Belgium)
Michel, LE BRETON (UniversitŽ de Toulouse I, GREMAQ and IDEI, Toulouse, France)
Alexei , SAVVATEV (NES, Moscow)
Sholmo, WEBER (Southern Methodist University, Dallas, USA and UniversitŽ Catholique de Louvain, CORE - Belgium)

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Abstract

Consider a population of citizens uniformly spread over the entire plane, that faces a problem of locating public facilities to be used by its members. The cost of every facility is financed by its users, who also face an idiosyncratic private access cost to the facility. We assume that the facilities cost is independent of location and access costs are linear with respect to the Euclidean distance. We show that an external intervention that covers O.19% of the facility cost is sufficient to guarantee secession-proofness or no cross-subsidization, where no group of individuals is charged more than its stand alone cost incurred if it had acted on its own. Moreover, we demonstrate that in this case the Rawlsian access pricing is the only secession-proof allocation.

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Publisher Info
Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007030.

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Length: 23
Date of creation: 17 Sep 2007
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Handle: RePEc:ctl:louvec:2007030

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Related research
Keywords: Secession-proofness; optimal jurisdictions; Rawlsian allocation; hexagonal partition; cross-subsidiziation;

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Find related papers by JEL classification:
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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  7. Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers 164, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  8. Haimanko, Ori & Le Breton, Michel & Weber, Shlomo, 2004. "Voluntary formation of communities for the provision of public projects," Journal of Economic Theory, Elsevier, vol. 115(1), pages 1-34, March. [Downloadable!] (restricted)
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  11. Konishi, Hideo & Le Breton, Michel & Weber, Shlomo, 1998. "Equilibrium in a Finite Local Public Goods Economy," Journal of Economic Theory, Elsevier, vol. 79(2), pages 224-244, April. [Downloadable!] (restricted)
  12. Wooders, Myrna, 1980. "The Tiebout Hypothesis: Near Optimality in Local Public Good Economies," Econometrica, Econometric Society, vol. 48(6), pages 1467-85, September. [Downloadable!] (restricted)
  13. BOGOMOLNAIA, Anna & LE BRETON, Michel & SAVVATEEV, Alexei & WEBER, Shlomo, 2005. "Stability of jurisdiction structures under the equal share and median rules," CORE Discussion Papers 2005032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  15. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
    Other versions:
  16. repec:cup:cbooks:9780521629560 is not listed on IDEAS
  17. Casella, Alessandra, 2001. "The Role of Market Size in the Formation of Jurisdictions," Review of Economic Studies, Blackwell Publishing, vol. 68(1), pages 83-108, January.
    Other versions:
  18. Stern, Nicholas, 1972. "The optimal size of market areas," Journal of Economic Theory, Elsevier, vol. 4(2), pages 154-173, April. [Downloadable!] (restricted)
  19. Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August. [Downloadable!] (restricted)
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