Incomplete contracts and excludable public goods

Felix J. Bierbrauer

Journal of Public Economics, 2011, vol. 95, issue 7, 553-569

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: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:7:p:553-569

DOI: 10.1016/j.jpubeco.2010.11.028

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