On the Legitimacy of Coercion for the Financing of Public Goods
50 Pages Posted: 9 Dec 2009
Date Written: December 1, 2009
The literature on public goods has shown that efficient outcomes are impossible if participation constraints have to be respected. This paper addresses the question whether they should be imposed. It asks under what conditions efficiency considerations justify that individuals are forced to pay for public goods that they do not value. It is shown that participation constraints are desirable if public goods are provided by a malevolent Leviathan. By contrast, with a Pigouvian planner, efficiency can be achieved. Finally, the paper studies the delegation of public goods provision to a profit-maximizing firm. This also makes participation constraints desirable.
Keywords: Public goods, Mechanism Design, Incomplete Contracts, Regulation
JEL Classification: D02, D82, H41, L51
Suggested Citation: Suggested Citation