Optimal Cost Sharing for Green Goods

Nathan Chan and Mirco Dinelli

Journal of the Association of Environmental and Resource Economists, 2020, vol. 7, issue 6, 1033 - 1068

Abstract: Impure public goods, which jointly produce private and public benefits, are widely available and increasingly prevalent, especially in the realm of environmentally friendly and socially responsible consumption. Existing research on impure public goods focuses on individual consumer choice and resultant Nash equilibrium outcomes, but little has been done to analyze how policy can improve efficiency in such markets. We develop the first mechanism to implement a Pareto optimal allocation in impure public good markets. We prove existence of a revenue-neutral cost-sharing solution and examine the properties of this equilibrium, demonstrating how it can be implemented through equivalent price adjustments to goods or embodied characteristics. Our approach employs standard Pigovian principles but applies to a much wider class of problems, including settings with strategic interactions, heterogeneous consumers, and richer preference structures. This analysis has many applications, including charitable giving with warm glow, renewable energy, and international efforts to generate public goods.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://dx.doi.org/10.1086/709883 (application/pdf)
http://dx.doi.org/10.1086/709883 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jaerec:doi:10.1086/709883

Access Statistics for this article

More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().