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Utilitarian mechanism design for an excludable public good

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  • Martin Hellwig

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Abstract

This paper studies the design of optimal utilitarian mechanisms for an excludable public good. Excludability provides a basis for making people pay for admissions; the payments can be used for redistribution and/or funding. Whereas previous work assumed that admissions are governed by the payment or nonpayment of a price, this paper allows for arbitrary admission rules. With sufficient inequality aversion, nondegenerate randomization in admissions is shown to be desirable for certain model specifications, with and without participation constraints. The paper also gives a sufficient condition on the distribution of preferences under which randomization is undesirable.
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Suggested Citation

  • 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.
  • Handle: RePEc:spr:joecth:v:44:y:2010:i:3:p:361-397 DOI: 10.1007/s00199-009-0488-3
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    References listed on IDEAS

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    1. Hellwig, Martin F., 2007. "A contribution to the theory of optimal utilitarian income taxation," Journal of Public Economics, Elsevier, pages 1449-1477.
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    7. Hellwig, Martin F., 2005. "A utilitarian approach to the provision and pricing of excludable public goods," Journal of Public Economics, Elsevier, pages 1981-2003.
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    Cited by:

    1. Loertscher, Simon & Marx, Leslie M., 2017. "Club good intermediaries," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 430-459.
    2. Christian Traxler, 2009. "Majority Voting and the Welfare Implications of Tax Avoidance," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_22, Max Planck Institute for Research on Collective Goods.

    More about this item

    Keywords

    Utilitarian welfare maximization; Admission rules for excludable public goods; Randomization in optimal mechanisms; D61; D63; H21; H41;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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