Optimal Ownership of Public Goods under Asymmetric Information

Patrick Schmitz

No 16003, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Incomplete contracts; Control rights; Public goods; Private information; Investment incentives (search for similar items in EconPapers)
JEL-codes: C78 D23 D82 D86 H41 L33 (search for similar items in EconPapers)
Date: 2021-04
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Related works:
Journal Article: Optimal ownership of public goods under asymmetric information (2021)
Working Paper: Optimal Ownership of Public Goods under Asymmetric Information (2021)
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