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A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods

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  • Hellwig, Martin

    (Sonderforschungsbereich 504)

Abstract

The paper studies utilitarian welfare maximization in a model with an excludable public good where individual preferences are private information. If inequality aversion is large, optimal allocations involve the use of admission fees and exclusion to redistribute resources from people who benefit a lot from the public good to people who benefit little. If inequality aversion is close to zero, optimal admission fees are zero. These results are robust if earning abilities provide an additional source of heterogeneity and income taxation an additional policy instrument.

Suggested Citation

  • Hellwig, Martin, 2003. "A Utilitarian Approach to the Provision and Pricing of Excludable Public Goods," Sonderforschungsbereich 504 Publications 03-36, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:03-36
    Note: I am very grateful for helpful comments from Felix Bierbrauer and Peter Norman and for research support from the Deutsche Forschungsgemeinschaft through Sonderforschungsbereich 504 at the University of Mannheim.
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    Cited by:

    1. Boyer, Pierre C., 2015. "Inequality-averse principal, exogenous budget, and second-best public-goods provision," Economics Letters, Elsevier, vol. 127(C), pages 61-63.
    2. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    3. Vincent Meisner & Pascal Pillath, 2024. "Monetizing digital content with network effects: A mechanism-design approach," Papers 2408.15196, arXiv.org, revised Oct 2024.
    4. Maniquet, François & Sprumont, Yves, 2010. "Sharing the cost of a public good: An incentive-constrained axiomatic approach," Games and Economic Behavior, Elsevier, vol. 68(1), pages 275-302, January.
    5. Hanming Fang & Peter Norman, 2003. "An Efficiency Rationale for Bundling of Public Goods," Cowles Foundation Discussion Papers 1441, Cowles Foundation for Research in Economics, Yale University.
    6. Martin F. Hellwig, 2010. "Utilitarian mechanism design for an excludable public good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(3), pages 361-397, September.
    7. Hellwig, Martin F., 2007. "The provision and pricing of excludable public goods: Ramsey-Boiteux pricing versus bundling," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 511-540, April.
    8. Han, Seungjin, 2015. "Robust competitive auctions," Economics Letters, Elsevier, vol. 136(C), pages 207-210.
    9. Hans Gersbach, 2010. "Democratic Provision of Divisible Public Goods," CESifo Working Paper Series 2939, CESifo.
    10. Yeti Nisha Madhoo & Shyam Nath, 2014. "Beneficiary charges: The Cinderella of subnational finance," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 11, pages 364-402, Edward Elgar Publishing.
    11. Hellwig, Martin, 2004. "Optimal income taxation, public-goods provision and public-sector pricing : a contribution to the foundations of public economics," Papers 04-42, Sonderforschungsbreich 504.
    12. Hellwig, Martin F., 2005. "A utilitarian approach to the provision and pricing of excludable public goods," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 1981-2003, December.
    13. Hanming Fang & Peter Norman, 2010. "Optimal Provision of Multiple Excludable Public Goods," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 1-37, November.
    14. Grunewald, Andreas & Hansen, Emanuel & Pönitzsch, Gert, 2014. "Political Selection and the Concentration of Political Power," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100339, Verein für Socialpolitik / German Economic Association.
    15. Obara, Takuya & 小原, 拓也 & Tsugawa, Shuichi & Managi, Shunsuke, 2019. "Envy-free Pricing for Impure Public Good," CCES Discussion Paper Series 69, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    16. Takuya Obara & Shuichi Tsugawa & Shunsuke Managi, 2021. "$$\lambda $$ λ envy-free pricing for impure public good," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(1), pages 11-25, April.
    17. OBARA, Takuya, 2016. "The optimal differentiated income taxation for groups categorized based on benefits from public goods," CCES Discussion Paper Series 64, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    18. Yeti Nisha Madhoo & Shyam Nath, 2010. "Beneficiary Charges: The Cinderella of Subnational Finance," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1317, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    19. Gravel, Nicolas & Poitevin, Michel, 2019. "Optimal provision of a public good with costly exclusion," Games and Economic Behavior, Elsevier, vol. 117(C), pages 451-460.

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    More about this item

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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