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Public Good Menus and Feature Complementarity

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  • Christian Roessler

Abstract

The distance metric on the location space for multidimensional public good varieties represents complementarity between the goods features. "Euclidean" feature complementarity has atypical strong properties that lead to a failure of intuition about the optimal-menu design problem. If the population is heterogeneous, increasing the distance between two varieties is welfare-improving in Euclidean space, but not generally. A basic optimal-direction principle always applies: "anticonvex" menu changes increase participation and surplus. A menu replacement is anticonvex if it moves the varieties apart in the common line space. The result extends to some impure public goods with break-even pricing and variety-specic costs. A sufficient condition for menus to be Pareto-optimal is that "personal price" (nominal price plus perceived distance from a variety) is linear in the norm that induces the distance metric.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 962.

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Length: 37 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:mlb:wpaper:962

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Keywords: Public Good Menus; complementarity;

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  1. Ehlers, Lars, 2002. "Multiple public goods and lexicographic preferences: replacement principle," Journal of Mathematical Economics, Elsevier, vol. 37(1), pages 1-15, February.
  2. Pal, Debashis & Sarkar, Jyotirmoy, 2002. "Spatial competition among multi-store firms," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 163-190, February.
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  6. Ehlers, Lars, 2001. "Independence axioms for the provision of multiple public goods as options," Mathematical Social Sciences, Elsevier, vol. 41(2), pages 239-250, March.
  7. Andreas Pfingsten & Andreas Wagener, 2003. "Bargaining Solutions as Social Compromises," Theory and Decision, Springer, vol. 55(4), pages 359-389, December.
  8. Perroni, Carlo & Scharf, Kimberly A, 2001. "Tiebout with Politics: Capital Tax Competition and Constitutional Choices," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 133-54, January.
  9. Michael L. Katz, 1980. "Multiplant Monopoly in a Spatial Market," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 519-535, Autumn.
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