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Optimal Ownership of Public Goods under Asymmetric Information

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  • Schmitz, Patrick W.

Abstract

Consider two parties who can make non-contractible investments in the provision of a public good. Who should own the physical assets needed to provide the public good? In the literature it has been argued that the party who values the public good most should be the owner, regardless of the investment technologies. Yet, this result has been derived under the assumption of symmetric information. We show that technology matters when the negotiations over the provision of the public good take place under asymmetric information. If party A has a better investment technology, ownership by party A can be optimal even when party B has a larger expected valuation of the public good.

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  • Schmitz, Patrick W., 2021. "Optimal Ownership of Public Goods under Asymmetric Information," CEPR Discussion Papers 16003, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16003
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    Cited by:

    1. Patrick W Schmitz, 2022. "How (Not) to Purchase Novel Goods and Services: Specific Performance Versus at-will Contracts," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2563-2577.
    2. Schmitz, Patrick W., 2023. "The proper scope of government reconsidered: Asymmetric information and incentive contracts," European Economic Review, Elsevier, vol. 157(C).
    3. Maija Halonen-Aktawijuka & Evanjelos Parfilis, 2022. "Who Should Own the Past?," Bristol Economics Discussion Papers 22/758, School of Economics, University of Bristol, UK.
    4. Schmitz, Patrick W., 2024. "When should the government own the physical assets needed to provide public goods?," Economics Letters, Elsevier, vol. 241(C).
    5. Marian Tokar & Hanna Kumar & Inna Kostyrya & Alona Kliuchnik, 2023. "Determining the Eastern European non-governmental organizations sustainability under crisis conditions and during social and technological transformations," Eastern-European Journal of Enterprise Technologies, PC TECHNOLOGY CENTER, vol. 6(13 (126)), pages 33-41, December.

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    More about this item

    Keywords

    Incomplete contracts; Control rights; Public goods; Private information; Investment incentives;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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