Journal Article

Public-Good Provision with Many Participants

Martin F. Hellwig

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 70, issue 3, pages 589-614
Published in print July 2003 | ISSN: 0034-6527
Published online July 2003 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00257
Public-Good Provision with Many Participants

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For a nonexcludable public good with benefit and cost functions independent of the number of participants, this paper studies second-best allocations under Bayesian interim incentive compatibility and interim individual rationality. As the number of participants becomes large, second-best provision levels converge in distribution to first-best levels if the latter are bounded. Second-best provision levels become large in absolute terms but small relative to first-best levels if benefit and cost functions are isoelastic. In contrast, for an excludable public good, the ratio of second-best to first-best levels is bounded away from zero.

Keywords: H41

Journal Article.  11091 words.  Illustrated.

Subjects: Publicly Provided Goods

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