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Bargaining over public goods

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In a simple public good economy, we propose a natural bargaining procedure whose equilibria converge to Lindahl allocations as the cost of bargaining vanishes. The procedure splits the decision over the allocation in a decision about personalized prices and a decision about output levels for the public good. Since this procedure does not assume price-taking behavior, it provides a strategic foundation for the personalized taxes inherent to the Lindahl solution to the public goods problem.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2008/B08041.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number b08041.

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Length: 15 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:mse:cesdoc:b08041

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Keywords: Public goods; bargaining; alternating offers.;

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  1. Julio Davila & Jan Eeckhout, 2004. "Competitive Bargaining Equilibria," Cahiers de la Maison des Sciences Economiques b04067, Université Panthéon-Sorbonne (Paris 1).
  2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
  3. Harrington, Joseph Jr., 1989. "The advantageous nature of risk aversion in a three-player bargaining game where acceptance of a proposal requires a simple majority," Economics Letters, Elsevier, vol. 30(3), pages 195-200, September.
  4. Thomson, William, 1999. " Economies with Public Goods: An Elementary Geometric Exposition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 139-76.
  5. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  6. Banks, Jeffrey S. & Duggan, John, 1999. "A Bargaining Model of Collective Choice," Working Papers 1053, California Institute of Technology, Division of the Humanities and Social Sciences.
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