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The Pure Theory of Public Goods: Efficiency, Decentralization, and the Core

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  • Dimitrios Diamantaras

    (Temple University, Philadelphia PA)

  • Robert P. Gilles

    (Virginia Polytechnic Institute and State University, Blacksburg, VA)

Abstract

We extend the results of Mas-Colell (1980) and Weber and Wiesmeth (1991) on valuation equilibria and the relationship of cost share equilibria with the core. We allow for any finite number of private goods and a set of public projects without any structure. We show the two welfare theorems for valuation equilibrium, the inclusion of the set of cost share equilibria in the core, and the nonequivalence of these two sets for an economy with a finite number of agents. In the case that the set of public projects is endowed with a topological structure, we provide conditions under which the price system needed to decentralize a Pareto efficient allocation as a valuation equilibrium is continuous.

Suggested Citation

  • Dimitrios Diamantaras & Robert P. Gilles, 1994. "The Pure Theory of Public Goods: Efficiency, Decentralization, and the Core," Public Economics 9403001, EconWPA.
  • Handle: RePEc:wpa:wuwppe:9403001
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    References listed on IDEAS

    as
    1. Roberts, Donald John, 1974. "A note on returns to group size and the core with public goods," Journal of Economic Theory, Elsevier, vol. 9(3), pages 350-356, November.
    2. Weber, Shlomo & Wiesmeth, Hans, 1991. "The equivalence of core and cost share equilibria in an economy with a public good," Journal of Economic Theory, Elsevier, vol. 54(1), pages 180-197, June.
    3. Mas-Colell, Andreu & Silvestre, Joaquim, 1989. "Cost share equilibria: A Lindahlian approach," Journal of Economic Theory, Elsevier, vol. 47(2), pages 239-256, April.
    4. Vasilev, V. & Weber, S. & Wiesmeth, H., 1991. "The Equivalence of Core and Lindahl Equilibria in an Economy with Semi- Public Goods," Papers 91-13, York (Canada) - Department of Economics.
    5. Wooders, Myrna Holtz, 1989. "A Tiebout theorem," Mathematical Social Sciences, Elsevier, vol. 18(1), pages 33-55, August.
    6. Andreu Mas-Colell, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 625-641.
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    Citations

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    Cited by:

    1. MONIQUE FLORENZANO & ELENA L. del MERCATO, 2006. "Edgeworth and Lindahl-Foley equilibria of a General Equilibrium Model with Private Provision of Pure Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(5), pages 713-740, December.
    2. Ellickson, Bryan & Grodal, Birgit & Scotchmer, Suzanne & Zame, William R., 2001. "Clubs and the Market: Large Finite Economies," Journal of Economic Theory, Elsevier, vol. 101(1), pages 40-77, November.
    3. Ten Raa, T. & Gilles, R.P., 2000. "Club Efficiency and Lindahl Equilibrium with Semi-Public Goods," Discussion Paper 2000-08, Tilburg University, Center for Economic Research.
    4. van der Laan, G. & Ruys, P.H.M. & Talman, A.J.J., 2000. "Optimal Provision of Infrastructure Using Public-Private Partnership Contracts," Discussion Paper 2000-126, Tilburg University, Center for Economic Research.
    5. Hahn, Kyungdong & Gilles, Robert P., 1998. "Efficient egalitarian-equivalence and the core of an economy with public projects," Economics Letters, Elsevier, vol. 60(2), pages 173-178, August.
    6. Konishi, Hideo & Le Breton, Michel & Weber, Shlomo, 1998. "Equilibrium in a Finite Local Public Goods Economy," Journal of Economic Theory, Elsevier, vol. 79(2), pages 224-244, April.
    7. Berliant, Marcus & Konishi, Hideo, 2000. "The endogenous formation of a city: population agglomeration and marketplaces in a location-specific production economy," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 289-324, May.
    8. Hammond, Peter J & Villar, Antonio, 1998. " Efficiency with Non-convexities: Extending the "Scandinavian Consensus" Approaches," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 11-32, March.
    9. Achille Basile & Anna Simone & Maria Graziano, 2005. "Coalitional economies with public projects," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 25(1), pages 127-139, October.
    10. Diamantaras, D. & Gilles, R.P. & Ruys, P.H.M., 1994. "Efficiency and separability in economies with a trade center," Discussion Paper 1994-107, Tilburg University, Center for Economic Research.
    11. Robert P. Gilles & Maria Laura Pesce & Dimitrios Diamantaras, 2017. "The Provision of Collective Goods Through a Social Division of Labour," CSEF Working Papers 469, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    12. Maria Gabriella Graziano & Maria Romaniello, 2016. "Stable sets of allocations and the provision of public goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 15-42, June.
    13. Bryan Ellickson and Birgit Grodal, Suzanne Scotchmer, and William R. Zame., 1997. "Clubs and the Market: Continuum Economies," Economics Working Papers 97-254, University of California at Berkeley.
    14. Antonio Villar Notario & Peter Hammond, 1998. "- Valuation Equlibrium Revisited," Working Papers. Serie AD 1998-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    15. 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.
    16. ten Raa, Thijs & Gilles, Robert P., 2005. "Lindahl equilibrium and Schweizer's open club model with semipublic goods," Mathematical Social Sciences, Elsevier, vol. 49(3), pages 295-307, May.
    17. Arze del Granado, F. Javier & Martinez-Vazquez, Jorge & McNab, Robert M., 2012. "Decentralized Governance and Preferences for Public Goods," MPRA Paper 42459, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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