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An Efficiency Rationale for the Bundling of Public Goods

Author

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  • Peter Norman
  • Hanming Fang

Abstract

This paper studies the role of bundling in the efficient provision of excludable public goods. We show that bundling in the provision of unrelated public goods can enhance social welfare. With a large number of goods and agents, first best can be approximated with pure bundling. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that bundling alleviates the free riding problem in large economies and decreases the extent of use exclusions. Both results are related to the idea that bundling makes it possible to reduce the incidence of exclusions because the variance in the relevant valuations decreases

Suggested Citation

  • Peter Norman & Hanming Fang, 2004. "An Efficiency Rationale for the Bundling of Public Goods," Econometric Society 2004 North American Summer Meetings 458, Econometric Society.
  • Handle: RePEc:ecm:nasm04:458
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    Cited by:

    1. Suman Ghosh & Alexander Karaivanov & Mandar Oak, 2007. "A Case for Bundling Public Goods Contributions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 425-449, June.

    More about this item

    Keywords

    Public goods provision; bundling; exclusion;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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