Comparing the First-Best and Second-Best Provision of a Club Good: An Example
AbstractExcludable and congestible shared goods - club goods (e.g., internet access facilities) - are more prevalent than Samuelsonian public goods. Our example shows that, unlike the usual presumption with pure public goods, the optimal second-best supply of a club good might exceed its first-best level. We argue that this arises because user charges can be levied on club goods the government need not impose distortionary taxes to finance them. Thus, the first and second best in a club economy differ mainly because informational constraints prevent the government achieving the right income distribution in the latter.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Public Sector Economics with number 01/8.
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Other versions of this item:
- Clive Fraser & Ali al-Nowaihi, 2006. "Comparing the first-best and second-best provision of a club good: an example," Economics Bulletin, AccessEcon, vol. 8(4), pages 1-6.
- H4 - Public Economics - - Publicly Provided Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-09-26 (All new papers)
- NEP-CDM-2001-09-26 (Collective Decision-Making)
- NEP-PUB-2001-09-26 (Public Finance)
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