Nash-Cournot or Lindahl Behavior?: An Empirical Test for the NATO Allies

Todd Sandler and James C. Murdoch

The Quarterly Journal of Economics, 1990, vol. 105, issue 4, 875-894

Abstract: This paper derives systems of demand equations for distinguishing between Nash-Cournot and Lindahl behavior in a group that either shares a pure public good or an activity that provides a private and a pure public joint product. Systems of simultaneous equations are estimated based upon Nash-Cournot and Lindahl behavior for a sample of ten NATO allies for the 1956–1987 period. Nonnested hypothesis tests support the Nash-Cournot specification for five of the ten sample allies. No evidence of Lindahl behavior is found. The Nash-Cournot joint-product specification outperforms the pure public model for all sample allies.

Date: 1990
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