A Note on the Provision of a Public Service of Different Qualities

Monica Anna Giovanniello and Simone Tonin

Papers from arXiv.org

Abstract: We study how the quality dimension affects the social optimum in a model of spatial differentiation where two facilities provide a public service. If quality enters linearly in the individuals' utility function, a symmetric configuration, in which both facilities have the same quality and serve groups of individuals of the same size, does not maximize the social welfare. This is a surprising result as all individuals are symmetrically identical having the same quality valuation. We also show that a symmetric configuration of facilities may maximize the social welfare if the individuals' marginal utility of quality is decreasing.

Date: 2020-03, Revised 2021-11
New Economics Papers: this item is included in nep-upt
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