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An Efficiency Rationale for the Bundling of Public Goods

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  • Peter Norman
  • Hanming Fang

Abstract

This paper studies the role of bundling in the efficient provision of excludable public goods. We show that bundling in the provision of unrelated public goods can enhance social welfare. With a large number of goods and agents, first best can be approximated with pure bundling. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that bundling alleviates the free riding problem in large economies and decreases the extent of use exclusions. Both results are related to the idea that bundling makes it possible to reduce the incidence of exclusions because the variance in the relevant valuations decreases

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 458.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:458

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Keywords: Public goods provision; bundling; exclusion;

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Cited by:
  1. Suman Ghosh & Alexander Karaivanov & Mandar Oak, 2005. "A Case for Bundling Public Goods Contributions?," Working Papers 05005, Department of Economics, College of Business, Florida Atlantic University.

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