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An Incomplete Contract Perspective on Public Good Provision

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  • David Martimort
  • Philippe De Donder
  • Etienne Billette de Villemeur

Abstract

This paper surveys what can be learned from recent advances in the incomplete contract literature to understand how public goods are or should be provided. The paper starts with a section on the full information case that presents and discusses the classical Samuelson condition on the optimal provision of public goods. The rest of the paper presents results under asymmetric information. It is constituted of two main parts. In the first one, the social planner has complete contracting ability. We discuss the basic setting and assumptions of this comprehensive contracting approach and study the trade-offs it generates. The second part of the paper is devoted to the study of contracting incompleteness. Such incompleteness can emerge from various sources, which we present and discuss. We then study the case of a politically chosen decision-maker and the consequences of its inability to commit for more than one period and of the ability for individuals to form groups. Finally, we address the problem of the choice between public and private forms of public good provision. The concluding section summarizes the main policy lessons. Copyright Blackwell Publishers Ltd, 2005.

Suggested Citation

  • David Martimort & Philippe De Donder & Etienne Billette de Villemeur, 2005. "An Incomplete Contract Perspective on Public Good Provision," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 149-180, April.
  • Handle: RePEc:bla:jecsur:v:19:y:2005:i:2:p:149-180
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    References listed on IDEAS

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    Cited by:

    1. Bierbrauer, Felix J., 2011. "Incomplete contracts and excludable public goods," Journal of Public Economics, Elsevier, vol. 95(7), pages 553-569.
    2. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1091-1126.
    3. MacDonald, Peter, 2013. "Labour substitution and the scope for military outsourcing," MPRA Paper 46688, University Library of Munich, Germany.
    4. repec:eee:rujoec:v:1:y:2015:i:1:p:55-80 is not listed on IDEAS
    5. Gunnar Lindberg & Erik Fahlbeck, 2011. "New forms of local collective governance linked to the agricultural landscape: identifying the scope and possibilities for hybrid institutions," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 9(1/2), pages 31-47.
    6. Valeria Gattai & Piergiovanna Natale, 2014. "Joint Ventures and the Property Rights Theory of the Firm: a Review of the Literature," Working Papers 287, University of Milano-Bicocca, Department of Economics, revised Dec 2014.
    7. Rainer Bartel, 2007. "Der öffentliche Sektor in der Defensive," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 33(2), pages 199-230.
    8. Klênio de Souza Barbosa & Pierre C. Boyer, 2011. "Competition for Local Public Services with Learning-by-doing and Transferability," Working Papers 06-2011, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
    9. repec:bla:jecsur:v:31:y:2017:i:1:p:281-302 is not listed on IDEAS
    10. Grosjean Pauline, 2010. "Maintenance Costs, Outside Options and Optimal Ownership of a Public Good," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-18, November.
    11. Malueg, David A. & Yates, Andrew J., 2006. "Citizen participation in pollution permit markets," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 205-217, March.
    12. Felix Bierbrauer, 2010. "An incomplete contracts perspective on the provision and pricing of excludable public goods," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2010_01, Max Planck Institute for Research on Collective Goods.

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