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One-sided private provision of public goods with implicit Lindahl pricing

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  • Meier, Volker

Abstract

We consider a sequential game in which one player produces a public good and the other player can influence this decision by making an unconditional transfer. An efficient allocation requires the Lindahl property: the sum of the two (implicit) individual prices has to be equal to the resource cost of the public good. Under mild conditions this requires a personal price for the providing player that lies below half of the resource cost. These results can, for example, justify high marginal taxes on wages of secondary earners.

Suggested Citation

  • Meier, Volker, 2013. "One-sided private provision of public goods with implicit Lindahl pricing," Munich Reprints in Economics 19181, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:19181
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    References listed on IDEAS

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    1. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
    2. Boskin, Michael J. & Sheshinski, Eytan, 1983. "Optimal tax treatment of the family: Married couples," Journal of Public Economics, Elsevier, vol. 20(3), pages 281-297, April.
    3. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 5(1), pages 121-159, December.
    4. Rob, Rafael, 1989. "Pollution claim settlements under private information," Journal of Economic Theory, Elsevier, vol. 47(2), pages 307-333, April.
    5. Martimort, David & Moreira, Humberto, 2010. "Common agency and public good provision under asymmetric information," Theoretical Economics, Econometric Society, vol. 5(2), May.
    6. Althammer, Wilhelm & Buchholz, Wolfgang, 1993. "Lindahl-equilibria as the outcome of a non-cooperative game : A reconsideration," European Journal of Political Economy, Elsevier, vol. 9(3), pages 399-405, August.
    7. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 589-614.
    8. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 5(1), pages 121-159, December.
    9. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, October.
    10. Meier, Volker & Rainer, Helmut, 2012. "On the optimality of joint taxation for noncooperative couples," Labour Economics, Elsevier, vol. 19(4), pages 633-641.
    11. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
    12. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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