Pre-negotiation commitment and internalization in public good provision through bilateral negotiations

Noriaki Matsushima and Ryusuke Shinohara

Journal of Public Economics, 2019, vol. 175, issue C, 84-93

Abstract: A profit-maximizing public good supplier endogenously determines the level of the public good and simultaneously negotiates with beneficiaries of the good one by one. A pre-negotiation commitment on the production level of the public good by the supplier enhances the internalization of beneficiaries' preferences. With the commitment, the supplier produces the public good at an efficient level in equilibrium if and only if its bargaining power is sufficiently weak. In addition, the public good is produced excessively as a result of the commitment when the supplier's bargaining power is sufficiently strong.

Keywords: Public good; Simultaneous bilateral bargaining; Supplier bargaining power; Nash bargaining solution (search for similar items in EconPapers)
JEL-codes: C78 D42 D62 H41 H44 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Working Paper: Pre-negotiation commitment and internalization in public good provision through bilateral negotiations (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:175:y:2019:i:c:p:84-93

DOI: 10.1016/j.jpubeco.2019.03.009

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