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A Note on Marginal Valuation of Underpriced Facilities

John G. Hof and John Loomis

Public Finance Review, 1986, vol. 14, issue 4, 489-498

Abstract: This article points out that in a number of previous works on public investment criteria for underpriced facilities there is an implicit assumption that individuals demand either zero units or one unit of facility capacity. It is shown that if this assumption does not hold, previously identified investment criteria may at times be in error, because within-individual ordering of consumption units is not accounted for. Several different nonprice rationing schemes are discussed in which this assumption is not made, and solutions are presented that account for within-individual ordering of consumption units.

Date: 1986
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DOI: 10.1177/109114218601400408

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Handle: RePEc:sae:pubfin:v:14:y:1986:i:4:p:489-498