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Optimal Provision of Multiple Excludable Public Goods

This paper studies the optimal provision mechanism for multiple excludable public goods when agents' valuations are private information. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that it involves bundling. Bundling alleviates the free riding problem in large economies in two ways: first, it can increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions.

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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1441R.

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Length: 44 pages
Date of creation: Oct 2003
Date of revision: Apr 2006
Handle: RePEc:cwl:cwldpp:1441r
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Ledyard, John & Palfrey, Thomas, 2003. "A general characterization of interim efficient mechanisms for independent linear environments," Working Papers 1186, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  3. Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science.
  4. Tilman Borgers & Peter Norman, 2005. "A Note on Budget Balance under Interim Participation Constraints: The Case of Independent Types," Levine's Bibliography 784828000000000147, UCLA Department of Economics.
  5. Gregory S. Crawford & Ali Yurukoglu, 2012. "The Welfare Effects of Bundling in Multichannel Television Markets," American Economic Review, American Economic Association, vol. 102(2), pages 643-85, April.
  6. Manelli, Alejandro M. & Vincent, Daniel R., 2006. "Bundling as an optimal selling mechanism for a multiple-good monopolist," Journal of Economic Theory, Elsevier, vol. 127(1), pages 1-35, March.
  7. repec:oup:restud:v:57:y:1990:i:3:p:351-67 is not listed on IDEAS
  8. 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.
  9. Hanming Fang & Peter Norman, 2003. "An Efficiency Rationale for Bundling of Public Goods," Cowles Foundation Discussion Papers 1441, Cowles Foundation for Research in Economics, Yale University.
  10. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 589-614.
  11. Fang,H. & Norman,P., 2003. "To bundle or not to bundle," Working papers 18, Wisconsin Madison - Social Systems.
  12. repec:oup:qjecon:v:104:y:1989:i:2:p:371-83 is not listed on IDEAS
  13. Dana Jr. James D., 1993. "The Organization and Scope of Agents: Regulating Multiproduct Industries," Journal of Economic Theory, Elsevier, vol. 59(2), pages 288-310, April.
  14. Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
  15. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  16. Hanming Fang & Peter Norman, 2003. "Optimal Provision of Multiple Excludable Public Goods," Cowles Foundation Discussion Papers 1441R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2006.
  17. repec:oup:qjecon:v:90:y:1976:i:3:p:475-98 is not listed on IDEAS
  18. repec:rje:randje:v:37:y:2006:i:4:p:946-963 is not listed on IDEAS
  19. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1163-1188.
  20. repec:oup:restud:v:66:y:1999:i:1:p:151-68 is not listed on IDEAS
  21. Norman,P., 2000. "Efficient mechanisms for public goods with use exclusions," Working papers 15, Wisconsin Madison - Social Systems.
  22. Matthew O Jackson & Hugo F Sonnenschein, 2007. "Overcoming Incentive Constraints by Linking Decisions -super-1," Econometrica, Econometric Society, vol. 75(1), pages 241-257, 01.
  23. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  24. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April.
  25. Gregory Crawford, 2008. "The discriminatory incentives to bundle in the cable television industry," Quantitative Marketing and Economics, Springer, vol. 6(1), pages 41-78, March.
  26. Crawford, Gregory S. & Cullen, Joseph, 2007. "Bundling, product choice, and efficiency: Should cable television networks be offered a la carte?," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 379-404, October.
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