Monopolistic Provision of Excludable Public Goods Under Private Information

Public Finance, Vol. 52, No. 1, pp. 89-101, 1997

Posted: 19 Feb 2003

See all articles by Patrick W. Schmitz

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Abstract

There are many commodities that possess the characteristic of non-rivalness in consumption even though exclusion is possible. The focus of this paper is the optimal contract designed by a profit-maximizing monopolist, who can provide an excludable public good to a group of n potential consumers, when the consumers' valuations are private information. Distribution costs and congestion effects are taken into account and the results are related to the cases of private goods and pure public goods. Moreover, the second-best allocation rule, which is welfare-maximizing under the constraint of non-negative profits, is characterized. Interesting properties of the optimal mechanism in the case of many potential consumers are analyzed. The results are less pessimistic than related results from the literature on pure public goods. Furthermore, it turns out that in the limit the monopolist can use simple posted-price contracts. Implications of the model for public intervention are also briefly discussed.

JEL Classification: D82, H41

Suggested Citation

Schmitz, Patrick W., Monopolistic Provision of Excludable Public Goods Under Private Information. Public Finance, Vol. 52, No. 1, pp. 89-101, 1997. Available at SSRN: https://ssrn.com/abstract=381241

Patrick W. Schmitz (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Abstract Views
464
PlumX Metrics