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

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

No 2010_01, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

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.

Keywords: Incomplete Contracts; Excludable Public Goods; Regulation (search for similar items in EconPapers)
JEL-codes: D82 D86 H41 L51 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-pbe and nep-pub
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