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The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling

  • Hellwig, Martin

    ()

    (Sonderforschungsbereich 504)

This paper studies the relation between Bayesian mechanism design and the Ramsey-Boiteux approach to the provision and pricing of excludable public goods. For a large economy with private information about individual preferences, the two approaches are shown to be equivalent if and only if, in addition to incentive compatibility and participation contraints, the final allocation of private-good consumption and admission tickets to public goods satisfies a condition of renegotiation proofness. Without this condition, a mechanism involving mixed bundling, i.e. combination tickets at a discount, is superior.

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File URL: http://www.sfb504.uni-mannheim.de/publications/dp04-02.pdf
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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 04-02.

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Length: 31 pages
Date of creation: 03 Feb 2004
Date of revision:
Handle: RePEc:xrs:sfbmaa:04-02
Note: Without implicating them, I thank Felix Bierbrauer, Christian Hellwig, and Peter Norman for helpful discussions. I am also grateful for research support from the Deutsche Forschungsgemeinschaft through Sonderforschungsbereich 504 at the University of Mannheim.
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  1. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 46(1), pages 121-159, December.
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  4. Hanming Fang & Peter Norman, 2010. "Optimal Provision of Multiple Excludable Public Goods," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 1-37, November.
  5. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
  6. John O. Ledyard & Thomas R. Palfrey, 1999. "A Characterization of Interim Efficiency with Public Goods," Econometrica, Econometric Society, vol. 67(2), pages 435-448, March.
  7. Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
  8. Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  9. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
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  13. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
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  15. Robin Boadway & Michael Keen, 1991. "Public Goods, Self-Selection and Optimal Income Taxation," Working Papers 828, Queen's University, Department of Economics.
  16. Manelli, Alejandro M. & Vincent, Daniel R., 2006. "Bundling as an optimal selling mechanism for a multiple-good monopolist," Journal of Economic Theory, Elsevier, vol. 127(1), pages 1-35, March.
  17. Al-Najjar, Nabil I., 2004. "Aggregation and the law of large numbers in large economies," Games and Economic Behavior, Elsevier, vol. 47(1), pages 1-35, April.
  18. Schmitz, Patrick W., 1997. "Monopolistic Provision of Excludable Public Goods under Private Information," MPRA Paper 6549, University Library of Munich, Germany.
  19. Vidar Christiansen, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Oxford University Press, vol. 48(3), pages 447-457.
  20. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1163-1188.
  21. Thanassoulis, John, 2004. "Haggling over substitutes," Journal of Economic Theory, Elsevier, vol. 117(2), pages 217-245, August.
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  24. 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.
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