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On the Legitimacy of Coercion for the Financing of Public Goods

  • Felix Bierbrauer
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    The literature on public goods has shown that efficient outcomes are impossible if participation constraints have to be respected. This paper addresses the question whether they should be imposed. It asks under what conditions efficiency considerations justify that individuals are forced to pay for public goods that they do not value. It is shown that participation constraints are desirable if public goods are provided by a malevolent Leviathan. By contrast, with a Pigouvian planner, efficiency can be achieved. Finally, the paper studies the delegation of public goods provision to a profit-maximizing firm. This also makes participation constraints desirable.

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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2663.

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    Date of creation: 2009
    Date of revision:
    Handle: RePEc:ces:ceswps:_2663
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    1. Schmitz, Patrick W., 1997. "Monopolistic Provision of Excludable Public Goods under Private Information," MPRA Paper 6549, University Library of Munich, Germany.
    2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
    3. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP 354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Grüner, Hans Peter, 2008. "Public goods, participation constraints, and democracy: A possibility theorem," CEPR Discussion Papers 7066, C.E.P.R. Discussion Papers.
    6. Acemoglu, Daron & Golosov, Mikhail & Tsyvinski, Aleh, 2008. "Markets versus governments," Journal of Monetary Economics, Elsevier, vol. 55(1), pages 159-189, January.
    7. Rob, R., 1988. "Pollution Claim Settlements Under Private Information," Papers 19-88, Tel Aviv.
    8. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 46(1), pages 121-159, December.
    9. Steven Matthews & John Moore, 1985. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Discussion Papers 661, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
    11. Zvika Neeman, 1998. "The Relevance of Private Information in Mechanism Design," Papers 0093, Boston University - Industry Studies Programme.
    12. John O. Ledyard & Thomas R. Palfrey, 1999. "A Characterization of Interim Efficiency with Public Goods," Econometrica, Econometric Society, vol. 67(2), pages 435-448, March.
    13. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1163-1188, October.
    14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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