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A Note on the Provision of a Public Service of Different Qualities

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  • Monica Anna Giovanniello
  • Simone Tonin

Abstract

We study how the quality dimension affects the social optimum in a model of spatial differentiation where two facilities provide a public service. If quality enters linearly in the individuals' utility function, a symmetric configuration, in which both facilities have the same quality and serve groups of individuals of the same size, does not maximize the social welfare. This is a surprising result as all individuals are symmetrically identical having the same quality valuation. We also show that a symmetric configuration of facilities may maximize the social welfare if the individuals' marginal utility of quality is decreasing.

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  • Monica Anna Giovanniello & Simone Tonin, 2020. "A Note on the Provision of a Public Service of Different Qualities," Papers 2004.00669, arXiv.org, revised Nov 2021.
    • Handle: RePEc:arx:papers:2004.00669
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    References listed on IDEAS

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    3. Scotchmer, Suzanne, 2002. "Local public goods and clubs," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 29, pages 1997-2042, Elsevier.
    4. Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," LIDAM Discussion Papers CORE 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645, Elsevier.
    6. CREMER, Helmuth & de KERCHOVE, Anne-Marie & THISSE, Jacques-François, 1985. "An econometric theory of public facilities in space," LIDAM Reprints CORE 646, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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