An incomplete contracts perspective on the provision and pricing of excludable public goods
AbstractWe study whether a firm that produces and sells access to an excludable public good should face a self-financing requirement, or, alternatively, receive subsidies that help to cover the cost of public-goods provision. The main result is that the desirability of a self-financing requirement is shaped by an equity-efficiency trade-off: While first-best efficiency is out of reach with such a requirement, its imposition limits the firm's ability of rent extraction. Hence, consumer surplus may be higher if the firm has no access to public funds.
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Bibliographic InfoPaper 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 2010_01.
Date of creation: Apr 2010
Date of revision:
Incomplete Contracts; Excludable Public Goods; Regulation;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-PBE-2010-01-16 (Public Economics)
- NEP-PUB-2010-01-16 (Public Finance)
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