Efficiency with Non-Convexities: Extending the "Scandinavian Consensus" Approaches
October 1997 (Now published: Scandinavian Journal of Economics, 100 (1998), 11--32.) There are two distinct "Scandinavian consensus" approaches to public good supply, both based on agents' willingness to pay. A Wicksell--Foley public competitive equilibrium arises from a negative consensus in which no change of public environment, together with associated taxes and subsidies which finance it, will be unanimously approved. Alternatively, in a Lindahl or valuation equilibrium, charges for the public environment induce a positive consensus. To allow general non-convexities to be regarded as aspects of the public environment, we extend recent generalizations of these equilibrium notions and prove counterparts to both the usual fundamental efficiency theorems of welfare economics. Journal of Economic Literature classification: H41, D51, D6 Keywords: non-convexities, welfare theorems, public goods, public competitive equilibrium, politico-economic equilibrium, Lindahl equilibrium.
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