Monopolistic Competition and Public Good Provision with By-Product Firms

University of Alabama Economics, Finance & Legal Studies Working Paper No. 10-08-02

28 Pages Posted: 25 Aug 2010

See all articles by Paul Pecorino

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

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Date Written: August 1, 2010

Abstract

I develop a model in which the voluntary contributions mechanism for the provision of public goods totally breaks down in a large society. A by-product firm sells a private good and uses its profits to provide a public good. By-product firms compete with for-profit firms in a monopolistically competitive industry. If the number of by-product firms is proportional to the size of the society, then public good provision rises without bound as the society grows large. This stands in strong contrast to the results under the voluntary contributions mechanism.

Keywords: Public Goods, By-Product Firms, Free-Rider Problem, Collective Action

JEL Classification: D7; H4

Suggested Citation

Pecorino, Paul, Monopolistic Competition and Public Good Provision with By-Product Firms (August 1, 2010). University of Alabama Economics, Finance & Legal Studies Working Paper No. 10-08-02, Available at SSRN: https://ssrn.com/abstract=1665106 or http://dx.doi.org/10.2139/ssrn.1665106

Paul Pecorino (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
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