Lindahl pricing, three ways

Nathan Chan and Mirco Dinelli ()
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Mirco Dinelli: Yale University

Economics Bulletin, 2021, vol. 41, issue 4, 2386-2392

Abstract: It is well-known that the Lindahl equilibrium is Pareto optimal in public good economies. However, the details for implementing the Lindahl equilibrium in practice have not been explored in depth. In this note, we demonstrate how the Lindahl mechanism can be interpreted and implemented in three distinct but equivalent ways: 1) a quantity policy, 2) a price policy for a single-payer, or 3) a personalized price policy for n disaggregated consumers with matching transfers. Our exposition bridges different approaches for improving public good provision and has useful parallels to price versus quantity policies for externalities.

Keywords: Lindahl; cost sharing; matching; public goods (search for similar items in EconPapers)
JEL-codes: D7 H4 (search for similar items in EconPapers)
Date: 2021-12-29
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