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Optimal Provision of Multiple Excludable Public Goods

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Author Info
Hanming Fang
Peter Norman

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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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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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Handle: RePEc:nbr:nberwo:13797

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H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Norman, Peter & Fang, Hanming, 2004. "An Efficiency Rationale for Bundling of Public Goods," Micro Theory Working Papers norman-04-11-21-09-39-13, Microeconomics.ca Website, revised 08 Feb 2005. [Downloadable!]
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  2. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January. [Downloadable!] (restricted)
  3. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 151-68, January. [Downloadable!] (restricted)
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  4. Carl Bergstrom & Ted Bergstrom, 2004. "The costs and benefits of library site licenses to academic journals," University of California at Santa Barbara, Economics Working Paper Series 2004A, Department of Economics, UC Santa Barbara. [Downloadable!]
  5. 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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  6. Dana Jr. James D., 1993. "The Organization and Scope of Agents: Regulating Multiproduct Industries," Journal of Economic Theory, Elsevier, vol. 59(2), pages 288-310, April. [Downloadable!] (restricted)
  7. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Blackwell Publishing, vol. 71(4), pages 1163-1188, October. [Downloadable!] (restricted)
  8. Ledyard, John O. & Palfrey, Thomas R., 2007. "A general characterization of interim efficient mechanisms for independent linear environments," Journal of Economic Theory, Elsevier, vol. 127(1), pages 441-466, March. [Downloadable!] (restricted)
  9. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August. [Downloadable!] (restricted)
  10. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November. [Downloadable!] (restricted)
  11. repec:att:wimass:1920319 is not listed on IDEAS
  12. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May. [Downloadable!] (restricted)
  13. Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Blackwell Publishing, vol. 57(3), pages 351-67, July. [Downloadable!] (restricted)
  14. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April. [Downloadable!] (restricted)
  15. Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
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  16. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Blackwell Publishing, vol. 70(3), pages 589-614, 07. [Downloadable!] (restricted)
  17. Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science. [Downloadable!]
  18. repec:att:wimass:1920015 is not listed on IDEAS
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hanming Fang & Peter Norman, 2008. "Toward an Efficiency Rationale for the Public Provision of Private Goods," NBER Working Papers 13827, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Christoph Engel, 2007. "Competition in a Pure World of Internet Telephony," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2007_1, Max Planck Institute for Research on Collective Goods. [Downloadable!]
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