Monopolistic Provision of Excludable Public Goods under Private Information
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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Volume (Year): 52 (1997)
Issue (Month): 1 ()
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Werner Güth & Martin Hellwig, 1986.
"The private supply of a public good,"
Journal of Economics,
Springer, vol. 5(1), pages 121-159, December.
- Schmidt, Klaus M, 1996.
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Journal of Law, Economics and Organization,
Oxford University Press, vol. 12(1), pages 1-24, April.
- Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
- Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers 41, Princeton, Woodrow Wilson School - Discussion Paper.
- Tirole, Jean, 1994.
"The Internal Organization of Government,"
Oxford Economic Papers,
Oxford University Press, vol. 46(1), pages 1-29, January.
- George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 351-367.
- Richard D. Auster, 1977. "Private Markets in Public Goods (or Qualities)," The Quarterly Journal of Economics, Oxford University Press, vol. 91(3), pages 419-430.
- 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.
- Bigman, David, 1992. "Unanimity and exclusion as mechanisms to eliminate free riding in public goods : Diagrammatical illustrations," Journal of Economic Behavior & Organization, Elsevier, vol. 19(1), pages 101-117, September.
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