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Efficiency with Non-Convexities: Extending the "Scandinavian Consensus" Approaches

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  • Peter J. Hammond
  • Antonio Villar

Abstract

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.

Suggested Citation

  • Peter J. Hammond & Antonio Villar, "undated". "Efficiency with Non-Convexities: Extending the "Scandinavian Consensus" Approaches," Working Papers 97036, Stanford University, Department of Economics.
  • Handle: RePEc:wop:stanec:97036
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    References listed on IDEAS

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    1. Bergstrom, Theodore C., 1970. "A "Scandinavian consensus" solution for efficient income distribution among nonmalevolent consumers," Journal of Economic Theory, Elsevier, vol. 2(4), pages 383-398, December.
    2. E. Malinvaud, 1972. "Prices for Individual Consumption, Quantity Indicators for Collective Consumption," Review of Economic Studies, Oxford University Press, vol. 39(4), pages 385-405.
    3. Grandmont, J. M. & McFadden, D., 1972. "A technical note on classical gains from trade," Journal of International Economics, Elsevier, vol. 2(2), pages 109-125, May.
    4. Mas-Colell, Andreu & Silvestre, Joaquim, 1989. "Cost share equilibria: A Lindahlian approach," Journal of Economic Theory, Elsevier, vol. 47(2), pages 239-256, April.
    5. J. H. Dreze & D. de la Vallee Poussin, 1971. "A Tâtonnement Process for Public Goods," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 133-150.
    6. Egbert Dierker, 1986. "When does marginal cost pricing lead to Pareto efficiency?," Journal of Economics, Springer, vol. 46(1), pages 41-66, December.
    7. Diamantaras, Dimitrios & Gilles, Robert P, 1996. "The Pure Theory of Public Goods: Efficiency, Dencentralization, and the Core," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 851-860, November.
    8. Peter J. Hammond, 1987. "Markets as Constraints: Multilateral Incentive Compatibility in Continuum Economies," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 399-412.
    9. Antonio Villar, 1994. "Existence and efficiency of equilibrium in economics with increasing returns to scale: an exposition," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 205-243, May.
    10. Mas-Colell, Andreu & Silvestre, Joaquim, 1991. "A note on cost-share equilibrium and owner-consumers," Journal of Economic Theory, Elsevier, vol. 54(1), pages 204-214, June.
    11. Kaneko, Mamoru, 1977. "The ratio equilibrium and a voting game in a public goods economy," Journal of Economic Theory, Elsevier, vol. 16(2), pages 123-136, December.
    12. Brown, Donald J. & Heal, Geoffrey, 1980. "Two-part tariffs, marginal cost pricing and increasing returns in a general equilibrium model," Journal of Public Economics, Elsevier, vol. 13(1), pages 25-49, February.
    13. Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
    14. Diamantaras, Dimitrios & Gilles, Robert P & Scotchmer, Suzanne, 1996. "Decentralization of Pareto Optima in Economies with Public Projects, Nonessential Private Goods and Convex Costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(3), pages 555-564, October.
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    Cited by:

    1. Antonio Villar Notario & Peter Hammond, 2001. "Efficiency And Core Properties Of Valuation Equilibrium With Increasing Returns," Working Papers. Serie AD 2001-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Antonio Villar, 2007. "Competitive Pricing," Working Papers 07.08, Universidad Pablo de Olavide, Department of Economics.
    3. Antonio Villar Notario & Peter Hammond, 1998. "- Valuation Equlibrium Revisited," Working Papers. Serie AD 1998-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Maria Graziano & Maria Romaniello, 2012. "Linear cost share equilibria and the veto power of the grand coalition," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(2), pages 269-303, February.
    5. Antonio Villar Notario, 2000. "On The Efficiency Of Market Equilibrium In Production Economies," Working Papers. Serie AD 2000-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

    More about this item

    Keywords

    non-convexities; welfare theorems; public goods; public competitive equilibrium; politico-economic equilibrium; Lindahl equilibrium;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D6 - Microeconomics - - Welfare Economics

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