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Monopolistic Provision of Excludable Public Goods under Private Information

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  • Schmitz, Patrick W

Abstract

This paper characterizes the optimal contract designed by a profit-maximizing monopolist, who can provide an indivisible and excludable public good to a group of n potential consumers, whose valuations are private information. The analysis takes distribution costs and congestion effects into account. The second-best allocation rule, which is welfare-maximizing under the constraint of non-negative profits, is characterized. Properties of the optimal mechanism in the case of many potential consumers are analyzed and it is shown that in this case the monopolist can use simple posted-price contracts. Finally, implications for public intervention are discussed.
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Suggested Citation

  • Schmitz, Patrick W, 1997. "Monopolistic Provision of Excludable Public Goods under Private Information," Public Finance = Finances publiques, , vol. 52(1), pages 89-101.
  • Handle: RePEc:pfi:pubfin:v:52:y:1997:i:1:p:89-101
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    References listed on IDEAS

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    1. Tirole, Jean, 1994. "The Internal Organization of Government," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 1-29, January.
    2. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 5(1), pages 121-159, December.
    3. Schmidt, Klaus M, 1996. "The Costs and Benefits of Privatization: An Incomplete Contracts Approach," Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 1-24, April.
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    7. Cairns, Robert D., 1993. "The optimal auction : A mechanism for optimal third-degree price discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 20(2), pages 213-225, February.
    8. Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers 41, Princeton, Woodrow Wilson School - Discussion Paper.
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    Citations

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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. Marco Sahm, 2015. "Advance-Purchase Financing of Projects with Few Buyers," CESifo Working Paper Series 5560, CESifo Group Munich.
    3. Ledyard, John O. & Palfrey, Thomas R., 2007. "A general characterization of interim efficient mechanisms for independent linear environments," Journal of Economic Theory, Elsevier, vol. 133(1), pages 441-466, March.
    4. 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.
    5. 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.
    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, 2010. "Utilitarian mechanism design for an excludable public good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(3), pages 361-397, September.
    8. Schmitz, Patrick W., 2002. "Monopolistic Licensing Strategies under Asymmetric Information," MPRA Paper 12532, University Library of Munich, Germany.
    9. Sahm, Marco, 2006. "Essays in Public Economic Theory," Munich Dissertations in Economics 5633, University of Munich, Department of Economics.
    10. Csapó, Gergely & Müller, Rudolf, 2013. "Optimal mechanism design for the private supply of a public good," Games and Economic Behavior, Elsevier, vol. 80(C), pages 229-242.
    11. Bernd Huber & Marco Runkel, 2009. "Tax competition, excludable public goods, and user charges," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 321-336, June.
    12. Martin Hellwig & Felix Bierbrauer, 2009. "Public Good Provision in a Large Economy," 2009 Meeting Papers 1062, Society for Economic Dynamics.
    13. Felix Bierbrauer, 2009. "On the legitimacy of coercion for the financing of public goods," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_15, Max Planck Institute for Research on Collective Goods.
    14. 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.
    15. Schmitz, Patrick W., 2002. "On Monopolistic Licensing Strategies under Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 106(1), pages 177-189, September.
    16. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1163-1188.
    17. Felix Bierbrauer, 2009. "On the Legitimacy of Coercion for the Financing of Public Goods," Working Papers 2009.98, Fondazione Eni Enrico Mattei.
    18. Loertscher, Simon & Marx, Leslie M., 2017. "Club good intermediaries," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 430-459.
    19. Murat Yilmaz, 2010. "Auctioning a Discrete Public Good under Incomplete Information," Working Papers 2010/14, Bogazici University, Department of Economics.
    20. Hellwig, Martin, 2004. "Optimal income taxation, public-goods provision and public-sector pricing : a contribution to the foundations of public economics," Papers 04-42, Sonderforschungsbreich 504.
    21. Bierbrauer, Felix, 2009. "On the legitimacy of coercion for the nancing of public goods," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 265, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    22. Sahm, Marco, 2015. "Advance-Purchase Financing of Projects with Few Buyers," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113122, Verein für Socialpolitik / German Economic Association.
    23. Felix Bierbrauer, 2009. "On the Legitimacy of Coercion for the Financing of Public Goods," CESifo Working Paper Series 2663, CESifo Group Munich.
    24. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 589-614.

    More about this item

    JEL classification:

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

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