Optimal Provision of Multiple Excludable Public Goods

54 Pages Posted: 13 Feb 2008 Last revised: 14 Sep 2022

See all articles by Hanming Fang

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Peter Norman

University of North Carolina (UNC) at Chapel Hill

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Date Written: February 2008

Abstract

This paper studies the optimal provision mechanism for multiple excludable public goods when agents' valuations are private information. For a parametric class of problems with binary valuations, we demonstrate that the optimal mechanism involves bundling if a regularity condition, akin to a hazard rate condition, on the distribution of valuations is satisfied. Bundling alleviates the free riding problem in large economies in two ways: first, it may increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions. If the regularity condition is violated, then the optimal solution replicates the separate provision outcome.

Suggested Citation

Fang, Hanming and Norman, Peter, Optimal Provision of Multiple Excludable Public Goods (February 2008). NBER Working Paper No. w13797, Available at SSRN: https://ssrn.com/abstract=1092845

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Peter Norman

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

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