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‘Almost’ subsidy-free spatial pricing in a multi-dimensional setting

  • Jacques, DREZE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE) - Belgium)

  • Michel, LE BRETON

    (Université de Toulouse I, GREMAQ and IDEI, Toulouse, France)

  • Alexei , SAVVATEV

    (NES, Moscow)

  • Sholmo, WEBER

    (Southern Methodist University, Dallas, USA and Université Catholique de Louvain, CORE - Belgium)

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 O.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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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007030.

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Length: 23
Date of creation: 01 Sep 2007
Date of revision:
Handle: RePEc:ctl:louvec:2007030
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  1. 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.
  2. 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.
  3. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 625-41, June.
  4. WEBER, Shlomo & ZAMIR, Shmuel, . "Proportional taxation: nonexstence of stable structures in an economy with a public good," CORE Discussion Papers RP -621, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Guesnerie, Roger & Oddou, Claude, 1981. "Second best taxation as a game," Journal of Economic Theory, Elsevier, vol. 25(1), pages 67-91, August.
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  7. 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.
  8. Anna Bogomolnaia & Michel Breton & Alexei Savvateev & Shlomo Weber, 2008. "Stability of jurisdiction structures under the equal share and median rules," Economic Theory, Springer, vol. 34(3), pages 525-543, March.
  9. Casella, Alessandra, 1996. "The Role of Market Size in the Formation of Jurisdictions," CEPR Discussion Papers 1429, C.E.P.R. Discussion Papers.
  10. Bollobas, Bela & Stern, Nicholas, 1972. "The optimal structure of market areas," Journal of Economic Theory, Elsevier, vol. 4(2), pages 174-179, April.
  11. Wooders, Myrna, 1980. "The Tiebout Hypothesis: Near Optimality in Local Public Good Economies," Econometrica, Econometric Society, vol. 48(6), pages 1467-85, September.
  12. 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).
  13. Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 393-413, April.
  14. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  15. Guesnerie, Roger & Oddou, Claude, 1988. " Increasing Returns to Size and Their Limits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 259-73.
  16. 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.
  17. Stern, Nicholas, 1972. "The optimal size of market areas," Journal of Economic Theory, Elsevier, vol. 4(2), pages 154-173, April.
  18. Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers 164, Institut d'Économie Industrielle (IDEI), Toulouse.
  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 4.
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