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An incomplete contracts perspective on the provision and pricing of excludable public goods

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  • Felix Bierbrauer

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

We study whether a firm that produces and sells access to an excludable public good should face a self-financing requirement, or, alternatively, receive subsidies that help to cover the cost of public-goods provision. The main result is that the desirability of a self-financing requirement is shaped by an equity-efficiency trade-off: While first-best efficiency is out of reach with such a requirement, its imposition limits the firm's ability of rent extraction. Hence, consumer surplus may be higher if the firm has no access to public funds.

Suggested Citation

  • Felix Bierbrauer, 2010. "An incomplete contracts perspective on the provision and pricing of excludable public goods," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2010_01, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2010_01
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    References listed on IDEAS

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    More about this item

    Keywords

    Incomplete Contracts; Excludable Public Goods; Regulation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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