IDEAS home Printed from https://ideas.repec.org/a/wsi/dltcxx/v03y2011i02ns021987111100038x.html
   My bibliography  Save this article

How Should A Public Good Be Provided? A Transaction Cost Approach

Author

Listed:
  • WENLI CHENG

    (Hunan University of Science and Technology, China;
    Department of Economics, Monash University, Australia)

  • DINGSHENG ZHANG

    (China Economics and Management Academy, Central University of Finance and Economics, China;
    Institute for Advanced Study, Wuhan University, China)

Abstract

This paper applies Coase's (1937) theory of the firm to study public good provision. It compares three methods of public good provision: (1) collective provision, where users organize themselves to jointly finance the public good which is produced by a specialized firm; (2) market provision without outsourcing, where a firm produces the public good and a private good, and sells them as a bundle; (3) market provision with outsourcing, where a firm produces a private good, outsources the public good, and sell them as a bundle. All three methods of public goods provision deal with the problem of non-excludability, but each is associated with different transaction costs, organization costs, and specialization economies. The best method is the one which achieves the optimum tradeoffs among transaction costs, organization costs, and specialization economies.

Suggested Citation

  • Wenli Cheng & Dingsheng Zhang, 2011. "How Should A Public Good Be Provided? A Transaction Cost Approach," Division of Labor & Transaction Costs (DLTC), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 69-80.
    • Handle: RePEc:wsi:dltcxx:v:03:y:2011:i:02:n:s021987111100038x
    DOI: 10.1142/S021987111100038X
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S021987111100038X
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S021987111100038X?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Holcombe, Randall G. (Холкомб, Рэндалл Дж.), 2015. "A Theory of the Theory of Public Goods [Теория Происхождения Теории Общественных Благ]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 196-207.
    2. Francis M. Bator, 1958. "The Anatomy of Market Failure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(3), pages 351-379.
    3. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
    4. Coase, R H, 1974. "The Lighthouse in Economics," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 357-376, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Déprés, Christophe & Grolleau, Gilles & Mzoughi, Naoufel, 2005. "Analyse exploratoire de quelques stratégies de fourniture ‘non publique’ des biens ‘publics’," Cahiers d'Economie et de Sociologie Rurales (CESR), Institut National de la Recherche Agronomique (INRA), vol. 74.
    2. Nicholas A. Curott & Edward P. Stringham, 2010. "The Rise of Government Law Enforcement in England," Palgrave Macmillan Books, in: Edward J. López (ed.), The Pursuit of Justice, chapter 0, pages 19-36, Palgrave Macmillan.
    3. Gregory DeAngelo & Taylor Leland Smith, 2020. "Private security, maritime piracy and the provision of international public safety," Journal of Risk and Uncertainty, Springer, vol. 60(1), pages 77-97, February.
    4. Terry L. Anderson, 2004. "Donning Coase‐coloured glasses: a property rights view of natural resource economics," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(3), pages 445-462, September.
    5. Demsetz, Harold, 1996. "The core disagreement between Pigou, the profession, and Coase in the analyses of the externality question," European Journal of Political Economy, Elsevier, vol. 12(4), pages 565-579, December.
    6. Vipin Veetil, 2011. "Conceptions of rationality in law and economics," European Journal of Law and Economics, Springer, vol. 31(2), pages 199-228, April.
    7. Chechelski, Piotr & Grochowska, Renata & Łopaciuk, Wiesław & Ślązak, Emil & Wasilewski, Adam & Wigier, Marek, 2012. "Development est public policy support in the food economy – the example of Poland," Multiannual Program Reports 164845, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    8. Zoltán Cséfalvay, 2011. "Searching for Economic Rationale behind Gated Communities," Urban Studies, Urban Studies Journal Limited, vol. 48(4), pages 749-764, March.
    9. Polcyn, Jan, 2017. "Edukacja jako dobro publiczne - próba kwantyfikacji [Education as a public good – an attempt at quantification]," MPRA Paper 76606, University Library of Munich, Germany, revised 2017.
    10. Glenn Furton & Adam Martin, 2019. "Beyond market failure and government failure," Public Choice, Springer, vol. 178(1), pages 197-216, January.
    11. Kamath Shyam J., 1994. "Privatization: A Market Prospect Perspective," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 5(1), pages 1-52, March.
    12. Daniel D’Amico, 2012. "Comparative political economy when anarchism is on the table," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(1), pages 63-75, March.
    13. Dean, Thomas J. & McMullen, Jeffery S., 2007. "Toward a theory of sustainable entrepreneurship: Reducing environmental degradation through entrepreneurial action," Journal of Business Venturing, Elsevier, vol. 22(1), pages 50-76, January.
    14. J.A. den Hertog, 2010. "Review of economic theories of regulation," Working Papers 10-18, Utrecht School of Economics.
    15. Prasad, Ajnesh & Holzinger, Ingo, 2013. "Seeing through smoke and mirrors: A critical analysis of marketing CSR," Journal of Business Research, Elsevier, vol. 66(10), pages 1915-1921.
    16. Claude Hillinger, 2002. "A General Theory of Price and Quantity Aggregation and Welfare Measurement," CESifo Working Paper Series 818, CESifo.
    17. Paula E. Stephan, 2004. "Robert K. Merton's perspective on priority and the provision of the public good knowledge," Scientometrics, Springer;Akadémiai Kiadó, vol. 60(1), pages 81-87, May.
    18. Sanstad, Alan H. & DeCanio, Stephen J. & Boyd, Gale A. & Koomey, Jonathan G., 2001. "Estimating bounds on the economy-wide effects of the CEF policy scenarios," Energy Policy, Elsevier, vol. 29(14), pages 1299-1311, November.
    19. Élodie Bertrand, 2006. "La thèse d'efficience du « théorème de Coase ». Quelle critique de la microéconomie ?," Revue économique, Presses de Sciences-Po, vol. 57(5), pages 983-1007.
    20. Marco FRIGERIO & Daniela VANDONE, 2018. "Virtuous or Vicious? Development Banks in Europe," Departmental Working Papers 2018-07, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Keywords

    Public good; transaction costs; organization costs; specialization economies;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D - Microeconomics
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F - International Economics
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L - Industrial Organization
    • O - Economic Development, Innovation, Technological Change, and Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:dltcxx:v:03:y:2011:i:02:n:s021987111100038x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/dltc/dltc.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.