Core Equivalence with Congested Public Goods

Valery Vasil'ev (), Shlomo Weber () and Hans Wiesmeth

Economic Theory, 1995, vol. 6, issue 3, 373-87

Abstract: This paper examines a model of an infinite production economy with a finite number of types of agents and semi-public goods, which are subjected to crowding and exclusion. The utility of an agent depends not only on the vector of public commodities produced by the coalition to which she belongs, but also on the mass of agents of her type who are the members of this coalition. The main purpose of the paper is to derive necessary and sufficient conditions on the local degrees of congestion which would guarantee the equivalence between the core and the set of equal treatment Lindahl equilibria. We prove that this equivalence holds if and only if there are constant returns to group size for each type of agents. It implies that linearity of each agent's congestion function with respect to the mass of the agents of her own type is necessary of the core equivalence to hold.

Date: 1995
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