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A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods

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  • Hellwig, Martin

    ()
    (Sonderforschungsbereich 504)

Abstract

The paper studies utilitarian welfare maximization in a model with an excludable public good where individual preferences are private information. If inequality aversion is large, optimal allocations involve the use of admission fees and exclusion to redistribute resources from people who benefit a lot from the public good to people who benefit little. If inequality aversion is close to zero, optimal admission fees are zero. These results are robust if earning abilities provide an additional source of heterogeneity and income taxation an additional policy instrument.

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File URL: http://www.sfb504.uni-mannheim.de/publications/dp03-36.pdf
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Bibliographic Info

Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 03-36.

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Length: 39 pages
Date of creation: 10 Dec 2003
Date of revision:
Handle: RePEc:xrs:sfbmaa:03-36

Note: I am very grateful for helpful comments from Felix Bierbrauer and Peter Norman and for research support from the Deutsche Forschungsgemeinschaft through Sonderforschungsbereich 504 at the University of Mannheim.
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References

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  1. Cremer, Helmuth & Pestieau, Pierre & Rochet, Jean-Charles, 1999. "Capital Income Taxation when Inherited wealth is not Observable," IDEI Working Papers 109, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2001.
  2. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
  3. Hanming Fang & Peter Norman, 2003. "An Efficiency Rationale for Bundling of Public Goods," Cowles Foundation Discussion Papers 1441, Cowles Foundation for Research in Economics, Yale University.
  4. Hellwig, Martin F., 2005. "A utilitarian approach to the provision and pricing of excludable public goods," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 1981-2003, December.
  5. Blomquist, Sören & Christiansen, Vidar, 2001. "The Role of Prices on Excludable Public Goods," Working Paper Series 2001:14, Uppsala University, Department of Economics.
  6. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  7. Cremer, Helmuth & Laffont, Jean-Jacques, 2003. "Public goods with costly access," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1985-2012, September.
  8. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 589-614, 07.
  10. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  11. Dreze, Jacques H., 1980. "Public goods with exclusion," Journal of Public Economics, Elsevier, vol. 13(1), pages 5-24, February.
  12. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1163-1188, October.
  13. Martin Hellwig, 2004. "Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2004_14, Max Planck Institute for Research on Collective Goods.
  14. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  15. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  16. Deb, Rajat & Razzolini, Laura, 1999. "Auction-Like Mechanisms for Pricing Excludable Public Goods," Journal of Economic Theory, Elsevier, vol. 88(2), pages 340-368, October.
  17. 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.
  18. Moulin, Herve, 1994. "Serial Cost-Sharing of Excludable Public Goods," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 305-25, April.
  19. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  20. Christiansen, Vidar, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 447-57, July.
  21. Mikhail Golosov & Narayana R. Kocherlakota & Aleh Tsyvinski, 2001. "Optimal indirect and capital taxation," Working Papers 615, Federal Reserve Bank of Minneapolis.
  22. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 5(1), pages 121-159, December.
  23. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-78, August.
  24. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  25. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
  26. Schmitz, Patrick W, 1997. "Monopolistic Provision of Excludable Public Goods under Private Information," Public Finance = Finances publiques, , vol. 52(1), pages 89-101.
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Citations

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Cited by:
  1. 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.
  2. MANIQUET, François & SPRUMONT, Yves, . "Sharing the cost of a public good: An incentive-constrained axiomatic approach," CORE Discussion Papers RP -2184, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Hans Gersbach, 2010. "Democratic Provision of Divisible Public Goods," CESifo Working Paper Series 2939, CESifo Group Munich.
  4. Fang, Hanming & Norman, Peter, 2004. "An Efficiency Rationale for Bundling of Public Goods," Microeconomics.ca working papers norman-04-11-21-09-39-13, Vancouver School of Economics, revised 08 Feb 2005.
  5. Seungjin Han, 2014. "Robust Competitive Auctions: A Theory of Stable Markets," Department of Economics Working Papers 2014-04, McMaster University, revised Apr 2014.
  6. Hellwig, Martin F., 2007. "The provision and pricing of excludable public goods: Ramsey-Boiteux pricing versus bundling," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 511-540, April.
  7. Martin Hellwig, 2009. "Utilitarian Mechanism Design for an Excludable Public Good," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2009_12, Max Planck Institute for Research on Collective Goods.
  8. 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.
  9. Yeti Nisha Madhoo & Shyam Nath, 2010. "Beneficiary Charges: The Cinderella of Subnational Finance," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1317, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  10. Martin Hellwig, 2004. "Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2004_14, Max Planck Institute for Research on Collective Goods.

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