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Differentiated Public Goods: Privatization and Optimality

In: Does Economic Space Matter?

Author

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  • Nicholas Economides
  • Susan Rose-Ackerman

Abstract

Many commentators criticize centralized government production of public goods for not providing sufficient variety. Citizens with widely varying tastes all consume the same type and level of services. With fixed costs of production and variations in tastes and incomes, an efficient solution, familiar in the public finance literature, can be generated by a single government producer that supplies the public good and charges citizens different tax prices to take account of the variations in their tastes and incomes.1 This solution, while efficient, is not feasible. Citizens have, in general, no incentive to reveal their willingness to pay, and recent advances in demand-revealing processes have not produced entirely satisfactory solutions.2 In addition, if citizens’ tastes diverge sharply enough and if production costs are low enough, efficient solutions may also exist with several suppliers each producing a different variety of output for a subset of citizens.3,4

Suggested Citation

  • Nicholas Economides & Susan Rose-Ackerman, 1993. "Differentiated Public Goods: Privatization and Optimality," Palgrave Macmillan Books, in: Hiroshi Ohta & Jacques-François Thisse (ed.), Does Economic Space Matter?, chapter 6, pages 111-132, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-22906-2_7
    DOI: 10.1007/978-1-349-22906-2_7
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    Cited by:

    1. Aldashev, Gani & Verdier, Thierry, 2010. "Goodwill bazaar: NGO competition and giving to development," Journal of Development Economics, Elsevier, vol. 91(1), pages 48-63, January.
    2. Murat C. Mungan & Bariş K. Yörük, 2012. "Fundraising and Optimal Policy Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(4), pages 625-652, August.
    3. Krautheim, Sebastian & Verdier, Thierry, 2016. "Offshoring with endogenous NGO activism," Journal of International Economics, Elsevier, vol. 101(C), pages 22-41.
    4. Anthony Heyes & Steve Martin, 2017. "Social Labeling by Competing NGOs: A Model with Multiple Issues and Entry," Management Science, INFORMS, vol. 63(6), pages 1800-1813, June.
    5. Yörük, BarIs K., 2009. "How responsive are charitable donors to requests to give?," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1111-1117, October.
    6. Heyes, Anthony & Martin, Steve, 2015. "NGO mission design," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 197-210.
    7. Zudenkova, Galina, 2013. "Provision of Differentiated Public Goods within Organizations," MPRA Paper 50489, University Library of Munich, Germany.
    8. Albers, Heidi J. & Ando, Amy Whritenour, 2001. "State-Level Variation in Land-Trust Abundance: Could It Make Economic Sense," Discussion Papers 10873, Resources for the Future.
    9. Ly, Pierre & Mason, Geri, 2012. "Competition Between Microfinance NGOs: Evidence from Kiva," World Development, Elsevier, vol. 40(3), pages 643-655.
    10. Verdier, Thierry & Aldashev, Gani, 2007. "NGO Competition and the Markets for Development Donations," CEPR Discussion Papers 6350, C.E.P.R. Discussion Papers.

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