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Optimal Provision of Multiple Excludable Public Goods

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  • Hanming Fang
  • Peter Norman

Abstract

This paper studies the optimal provision mechanism for multiple excludable public goods when agents' valuations are private information. For a parametric class of problems with binary valuations, we demonstrate that the optimal mechanism involves bundling if a regularity condition, akin to a hazard rate condition, on the distribution of valuations is satisfied. Bundling alleviates the free riding problem in large economies in two ways: first, it may increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions. If the regularity condition is violated, then the optimal solution replicates the separate provision outcome.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13797.

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Date of creation: Feb 2008
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Publication status: published as Hanming Fang & Peter Norman, 2010. "Optimal Provision of Multiple Excludable Public Goods," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 1-37, November.
Handle: RePEc:nbr:nberwo:13797

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References

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  1. Norman,P., 2000. "Efficient mechanisms for public goods with use exclusions," Working papers, Wisconsin Madison - Social Systems 15, Wisconsin Madison - Social Systems.
  2. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(2), pages 371-83, May.
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Citations

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Cited by:
  1. Behringer, Stefan, 2008. "The Provision of a Public Good with a direct Provision Technology and a Large Number of Agents," MPRA Paper 11796, University Library of Munich, Germany.
  2. Martin Hellwig, 2006. "The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling," Working Paper Series of the Max Planck Institute for Research on Collective Goods, Max Planck Institute for Research on Collective Goods 2006_21, Max Planck Institute for Research on Collective Goods.
  3. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer, Springer, vol. 56(2), pages 375-408, June.
  4. Hanming Fang & Peter Norman, 2003. "Optimal Provision of Multiple Excludable Public Goods," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1441R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2006.
  5. Koessler, Frédéric & Martimort, David, 2012. "Optimal delegation with multi-dimensional decisions," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(5), pages 1850-1881.
  6. Eilat, Ran & Pauzner, Ady, 2011. "Optimal bilateral trade of multiple objects," Games and Economic Behavior, Elsevier, Elsevier, vol. 71(2), pages 503-512, March.
  7. Peter Norman & Hanming Fang, 2010. "Toward an Efficiency Rationale for the Public Provision of Private Goods," 2010 Meeting Papers, Society for Economic Dynamics 1185, Society for Economic Dynamics.
  8. Engel, Christoph, 0. "Competition in a pure world of Internet telephony," Telecommunications Policy, Elsevier, Elsevier, vol. 31(8-9), pages 530-540, September.
  9. Felix Koelle, 2012. "Heterogeneity and Cooperation in Privileged Groups: The Role of Capability and Valuation on Public Goods Provision," Cologne Graduate School Working Paper Series, Cologne Graduate School in Management, Economics and Social Sciences 03-08, Cologne Graduate School in Management, Economics and Social Sciences.
  10. Ellingsen, Tore & Paltseva, Elena, 2012. "The private provision of excludable public goods: An inefficiency result," Journal of Public Economics, Elsevier, Elsevier, vol. 96(9-10), pages 658-669.
  11. Grüner, Hans Peter & Koriyama, Yukio, 2012. "Public goods, participation constraints, and democracy: A possibility theorem," Games and Economic Behavior, Elsevier, Elsevier, vol. 75(1), pages 152-167.
  12. Grüner, Hans Peter, 2008. "Public goods, participation constraints, and democracy: A possibility theorem," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7066, C.E.P.R. Discussion Papers.

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