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Incomplete contracts and excludable public goods

  • Bierbrauer, Felix J.
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    We study whether a firm that produces and sells access to an excludable public good should face a self-financing requirement, or, alternatively, receive subsidies that help to cover the cost of public-goods provision. The main result is that the desirability of a self-financing requirement is shaped by an equity-efficiency trade-off: while first-best efficiency is out of reach with such a requirement, its imposition limits the firm's ability of rent extraction. Hence, consumer surplus may be higher if the firm has no access to public funds.

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    File URL: http://www.sciencedirect.com/science/article/pii/S004727271000188X
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    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 7 ()
    Pages: 553-569

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    Handle: RePEc:eee:pubeco:v:95:y:2011:i:7:p:553-569
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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