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A New Approach to Group Structure, Burden Sharing, and the Equilibrium Provision of Public Goods

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  • McGuire, Martin C
  • Shrestha, Ratna K

Abstract

In the received model of the voluntary provision of a pure public good, the usual practice is to proceed from assumptions about the group characteristics to inferences about an implied outcome. The approach advocated in this paper reverses the traditional direction. Assuming a Nash equilibrium, we ask how to characterize the diverse set of group characteristics which will support it. Approaching the problem from this angle we define three crucial characteristics of a group-equilibrium: consumer's "free rider inducing supply," "zero contribution-inducing wealth" and "voluntary surplus tribute" which is the amount by which a person's actual income exceeds his/her "zero-contribution inducing wealth." Defining these indicators we show how they form the foundation of a complete mapping between the distribution of individual characteristics of a group, and equilibrium public good supply. Certain questions such as the interaction between size of the group and heterogeneity of incomes and tastes not yet adequately addressed are shown to yield easily to this approach. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • McGuire, Martin C & Shrestha, Ratna K, 2003. "A New Approach to Group Structure, Burden Sharing, and the Equilibrium Provision of Public Goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(4), pages 341-356, August.
    • Handle: RePEc:kap:itaxpf:v:10:y:2003:i:4:p:341-56
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    Cited by:

    1. TOSHIHIRO IHORI & MARTIN C. McGUIRE, 2007. "Collective Risk Control and Group Security: The Unexpected Consequences of Differential Risk Aversion," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 231-263, April.
    2. Richard Cornes & Roger Hartley, 2007. "Aggregative Public Good Games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 201-219, April.
    3. Ratna K. Shrestha & James P. Feehan, 2002. "Contributions to International Public Goods and the Notion of Country Size," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(4), pages 551-559, December.

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