Instability in voluntary contributions based upon jointness in supply

Ralph Frasca

Public Choice, 1981, vol. 37, issue 3, 435-445

Abstract: The results of this analysis can be briefly summarized as follows. Voluntary provision of a public good may produce an unstable supply of this good in large group sizes. The primary characteristic responsible for this instability is jointness in supply. Non-exclusionary spillovers without jointness in supply do not produce a similar instability in the system. In a voluntary situation an individual supplies a good up until private marginal cost is equal to private marginal benefit. With spillovers in joint supply the social marginal benefit is a positive function of group size. In this case, the optimum group size is unbounded. However, at some group size the adjustment by the rest of the community to a larger social marginal benefit will cause destabilizing responses to the individual provision. With spillovers in mutually exclusive consumption the size of the social marginal benefit is unrelated to group size. Therefore, the tendency for destabilizing responses to occur as group size increases does not exist. In a voluntary setting, the supply of both quasi-public and quasi-private goods will be suboptimal. Accordingly, the attainment of optimality may suggest a reason for community-wide coordination in the provision of each good. The instability in supply of the quasi-public good provides an additional reason for coordinated group provision of this good. All other things equal, the priority for governmental action might be placed upon the provision of the quasi-public good. Copyright Martinus Nijhoff Publishers 1981

Date: 1981
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DOI: 10.1007/BF00133744

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