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“Almost” subsidy-free spatial pricing in a multi-dimensional setting

Listed author(s):
  • DREZE, Jacques

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • LE BRETON, Michel
  • SAVVATEEV, Alexei
  • WEBER, Shlomo

Consider a population of citizens uniformly spread over the entire plane, that faces a problem of locating public facilities to be used by its members. The cost of every facility is financed by its users, who also face an idiosyncratic private access cost to the facility. We assume that the facilities' cost is independent of location and access costs are linear with respect to the Euclidean distance. We show that an external intervention that covers 0.19% of the facility cost is sufficient to guarantee secession-proofness or no cross-subsidization, where no group of individuals is charged more than its stand alone cost incurred if it had acted on its own. Moreover, we demonstrate that in this case the Rawlsian access pricing is the only secession-proof allocation.

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File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2007_47.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007047.

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Date of creation: 01 Jul 2007
Handle: RePEc:cor:louvco:2007047
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  1. repec:adr:anecst:y:1997:i:45:p:09 is not listed on IDEAS
  2. Stern, Nicholas, 1972. "The optimal size of market areas," Journal of Economic Theory, Elsevier, vol. 4(2), pages 154-173, April.
  3. Konishi, Hideo & Le Breton, Michel & Weber, Shlomo, 1998. "Equilibrium in a Finite Local Public Goods Economy," Journal of Economic Theory, Elsevier, vol. 79(2), pages 224-244, April.
  4. BOGOMOLNAIA, Anna & LE BRETON, Michel & SAVVATEEV, Alexei & WEBER, Shlomo, 2006. "Stability under unanimous consent, free mobility and core," CORE Discussion Papers 2006007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Guesnerie, Roger & Oddou, Claude, 1988. " Increasing Returns to Size and Their Limits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 259-273.
  6. Guesnerie, Roger & Oddou, Claude, 1981. "Second best taxation as a game," Journal of Economic Theory, Elsevier, vol. 25(1), pages 67-91, August.
  7. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
  8. Andreu Mas-Colell, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 625-641.
  9. Bollobas, Bela & Stern, Nicholas, 1972. "The optimal structure of market areas," Journal of Economic Theory, Elsevier, vol. 4(2), pages 174-179, April.
  10. Casella, Alessandra, 1996. "The Role of Market Size in the Formation of Jurisdictions," CEPR Discussion Papers 1429, C.E.P.R. Discussion Papers.
  11. Dreze, Jacques & Le Breton, Michel & Weber, Shlomo, 2007. "Rawlsian pricing of access to public facilities: A unidimensional illustration," Journal of Economic Theory, Elsevier, vol. 136(1), pages 759-766, September.
  12. Wooders, Myrna, 1980. "The Tiebout Hypothesis: Near Optimality in Local Public Good Economies," Econometrica, Econometric Society, vol. 48(6), pages 1467-1485, September.
  13. Haimanko, Ori & Le Breton, Michel & Weber, Shlomo, 2004. "Voluntary formation of communities for the provision of public projects," Journal of Economic Theory, Elsevier, vol. 115(1), pages 1-34, March.
  14. Philippe Jehiel & Suzanne Scotchmer, 1997. "Free Mobility and the Optimal Number of Jurisdictions," Annals of Economics and Statistics, GENES, issue 45, pages 219-231.
  15. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  16. Bogomolnaia, Anna & Le Breton, Michel & Savvateev, Alexei & Weber, Shlomo, 2005. "Stability of Jurisdiction Structures under the Equal Share and Median Rule," IDEI Working Papers 362, Institut d'Économie Industrielle (IDEI), Toulouse.
  17. repec:adr:anecst:y:1997:i:45 is not listed on IDEAS
  18. Weber, Shlomo & Zamir, Shmuel, 1985. "Proportional taxation: Nonexistence of stable structures in an economy with a public good," Journal of Economic Theory, Elsevier, vol. 35(1), pages 178-185, February.
  19. Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-4.
  20. Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August.
  21. Cremer, Helmuth & De Kerchove, Anne-Marie & Thisse, Jacques-Francois, 1985. "An economic theory of public facilities in space," Mathematical Social Sciences, Elsevier, vol. 9(3), pages 249-262, June.
  22. Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 14(1), pages 84-112, February.
  23. Philippe Jehiel & Suzanne Scotchmer, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 393-413.
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