Download this Paper Open PDF in Browser

An Incomplete Contracts Perspective on the Provision and Pricing of Excludable Public Goods

43 Pages Posted: 7 Jan 2010 Last revised: 26 Apr 2010

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Date Written: April 2010

Abstract

We study whether a firm that produces and sells access to an excludable public good should face a self-financing requirement, or, alternatively, receive subsidies that help to cover the cost of public-goods provision. The main result is that the desirability of a self-financing requirement is shaped by an equity-efficiency trade-off: While first-best efficiency is out of reach with such a requirement, its imposition limits the firm's ability of rent extraction. Hence, consumer surplus may be higher if the firm has no access to public funds.

Keywords: Incomplete Contracts, Excludable Public Goods, Regulation

JEL Classification: D82, D86, H41, L51

Suggested Citation

Bierbrauer, Felix J., An Incomplete Contracts Perspective on the Provision and Pricing of Excludable Public Goods (April 2010). MPI Collective Goods Preprint, No. 2010/01. Available at SSRN: https://ssrn.com/abstract=1532168 or http://dx.doi.org/10.2139/ssrn.1532168

Felix J. Bierbrauer (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Paper statistics

Downloads
43
Abstract Views
245