An Efficiency Rationale for Bundling of Public Goods

53 Pages Posted: 10 Oct 2003

See all articles by Hanming Fang

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Peter Norman

University of British Columbia - Department of Economics

Date Written: October 2003

Abstract

This paper studies the optimal provision mechanism for multiple excludable public goods when agents' valuations are private information. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that it involves bundling. Bundling alleviates the free riding problem in large economies in two ways: first, it can increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions.

Keywords: Public goods provision, bundling, exclusion

JEL Classification: H41

Suggested Citation

Fang, Hanming and Norman, Peter, An Efficiency Rationale for Bundling of Public Goods (October 2003). Cowles Foundation Discussion Paper No. 1441; SSRI Working Paper No. 2003-19, Available at SSRN: https://ssrn.com/abstract=445863

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Peter Norman

University of British Columbia - Department of Economics ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z2
Canada
(604) 822-2839 (Phone)

HOME PAGE: http://faculty.arts.ubc.ca/pnorman/

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