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On the legitimacy of coercion for the financing of public goods

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Author Info
Felix Bierbrauer () (Max Planck Institute for Research on Collective Goods, Bonn)
Abstract

The literature on public goods has shown that efficient outcomes are impossible if participation constraints have to be respected. This paper addresses the question whether they should be imposed. It asks under what conditions efficiency considerations justify that individuals are forced to pay for public goods that they do not value. It is shown that participation constraints are desirable if public goods are provided by a malevolent Leviathan. By contrast, with a Pigouvian planner, efficiency can be achieved. Finally, the paper studies the delegation of public goods provision to a profit-maximizing firm. This also makes participation constraints desirable.

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2009_15.

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Date of creation: May 2009
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Handle: RePEc:mpg:wpaper:2009_15

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Related research
Keywords: Public goods; Mechanism Design; Incomplete Contracts; Regulation;

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Find related papers by JEL classification:
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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References listed on IDEAS
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  1. Gueth,Werner & Hellwig,Martin, 1986. "The private supply of a public good," Discussion Paper Serie A 40, University of Bonn, Germany.
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  2. Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-67, March. [Downloadable!] (restricted)
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  3. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
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  4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  5. Grüner, Hans Peter, 2008. "Public goods, participation constraints, and democracy: A possibility theorem," CEPR Discussion Papers 7066, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Neeman, Zvika, 2004. "The relevance of private information in mechanism design," Journal of Economic Theory, Elsevier, vol. 117(1), pages 55-77, July. [Downloadable!] (restricted)
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  7. Rob, Rafael, 1989. "Pollution claim settlements under private information," Journal of Economic Theory, Elsevier, vol. 47(2), pages 307-333, April. [Downloadable!] (restricted)
  8. Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2008. "Markets versus governments," Journal of Monetary Economics, Elsevier, vol. 55(1), pages 159-189, January. [Downloadable!] (restricted)
  9. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November. [Downloadable!] (restricted)
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  10. John O. Ledyard & Thomas R. Palfrey, 1999. "A Characterization of Interim Efficiency with Public Goods," Econometrica, Econometric Society, vol. 67(2), pages 435-448, March.
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