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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. For a class of problems with symmetric goods and binary valuations, we show that the optimal mechanism involves bundling if a regularity condition, akin to a hazard rate condition, on the distribution of valuations is satisfied. Relative to separate provision mechanisms, the optimal bundling mechanism may increase the asymptotic provision probability of socially efficient public goods from zero to one, and decreases the extent of use exclusions. If the regularity condition is violated, the optimal solution replicates the separate provision outcome for the two-good case. (JEL D82, H41)

Suggested Citation

  • 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:aea:aejmic:v:2:y:2010:i:4:p:1-37
    Note: DOI: 10.1257/mic.2.4.1
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Grüner, Hans Peter & Koriyama, Yukio, 2012. "Public goods, participation constraints, and democracy: A possibility theorem," Games and Economic Behavior, Elsevier, vol. 75(1), pages 152-167.
    4. Grüner, Hans Peter, 2008. "Public goods, participation constraints, and democracy: A possibility theorem," CEPR Discussion Papers 7066, C.E.P.R. Discussion Papers.
    5. Eilat, Ran & Pauzner, Ady, 2011. "Optimal bilateral trade of multiple objects," Games and Economic Behavior, Elsevier, vol. 71(2), pages 503-512, March.
    6. Stefan Behringer, 2005. "The Provision of a Public Good with a direct Provision Technology and Large Number of Agents," JEPS Working Papers 05-007, JEPS.
    7. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    8. John Asker & Mariagiovanna Baccara & SangMok Lee, 2021. "Patent auctions and bidding coalitions: structuring the sale of club goods," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 662-690, September.
    9. Eilat, Ran & Paunzer, Ady, 2008. "Optimal Bilateral Trade of Multiple Objects," Foerder Institute for Economic Research Working Papers 275716, Tel-Aviv University > Foerder Institute for Economic Research.
    10. Stefano Galavotti, 2014. "Reducing Inefficiency in Public Good Provision Through Linking," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 427-466, June.
    11. Engel, Christoph, 0. "Competition in a pure world of Internet telephony," Telecommunications Policy, Elsevier, vol. 31(8-9), pages 530-540, September.
    12. Koessler, Frédéric & Martimort, David, 2012. "Optimal delegation with multi-dimensional decisions," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1850-1881.
    13. Heywood, John S. & Li, Dongyang & Ye, Guangliang, 2023. "Private provision of price excludable public goods by rivals," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 291-307.
    14. Felix Kolle, 2012. "Heterogeneity and Cooperation in Privileged Groups: The Role of Capability and Valuation on Public Goods Provision," Discussion Papers 2012-07, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    15. Ellingsen, Tore & Paltseva, Elena, 2012. "The private provision of excludable public goods: An inefficiency result," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 658-669.
    16. Gravel, Nicolas & Poitevin, Michel, 2019. "Optimal provision of a public good with costly exclusion," Games and Economic Behavior, Elsevier, vol. 117(C), pages 451-460.
    17. Loertscher, Simon & Marx, Leslie M., 2017. "Club good intermediaries," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 430-459.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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