A Network Approach to Public Goods

68 Pages Posted: 15 May 2014 Last revised: 5 Nov 2019

See all articles by Matthew Elliott

Matthew Elliott

University of Cambridge

Benjamin Golub

Northwestern University

Date Written: January 17, 2017


Suppose agents can exert costly effort that creates nonrival, heterogeneous benefits for each other. At each possible outcome, a weighted, directed network describing marginal externalities is defined. We show that Pareto efficient outcomes are those at which the largest eigenvalue of the network is 1. An important set of efficient solutions — Lindahl outcomes — are characterized by contributions being proportional to agents' eigenvector centralities in the network. The outcomes we focus on are motivated by negotiations. We apply the results to identify who is essential for Pareto improvements, how to efficiently subdivide negotiations, and whom to optimally add to a team.

Keywords: public goods, externalities, bargaining, network centrality, eigenvector centrality

JEL Classification: C78, D50, D62, D70, H41

Suggested Citation

Elliott, Matthew and Golub, Benjamin, A Network Approach to Public Goods (January 17, 2017). Available at SSRN: https://ssrn.com/abstract=2436683 or http://dx.doi.org/10.2139/ssrn.2436683

Matthew Elliott

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Benjamin Golub (Contact Author)

Northwestern University ( email )

Evanston, IL 60201
United States

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