Efficient Mechanisms for Public Goods with Use Exclusions
UW-Madison SSRI Working Paper No. 2012
39 Pages Posted: 23 Nov 2000
Date Written: May 15, 2002
Abstract
This paper studies "voluntary bargaining agreements" in an environment where preferences over an excludable public good are private information. Unlike the case with a non-excludable public good, there are non-trivial conditions when there is significant provision in a large economy. The provision level converges in probability to a constant, which makes it possible to approximate the optimal solution by a simple fixed fee mechanism, which involves second degree price discrimination if identities are informative about the distribution of preferences. Truth-telling is a dominant strategy in the fixed fee mechanism. Being able to limit a public goods' consumption does not make it a turn-blue private good. For what, after all, are the true marginal costs of having one extra family tune in on the program. They are literally zero. Why then limit any family which would receive positive pleasure from tuning in on the program from doing so? [Samuelson [24], pp 335]
Keywords: Excludable Public Goods, Mechanism Design, Private Information, Asymmetric Information Bargaining
JEL Classification: D61, D82, H41
Suggested Citation: Suggested Citation
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