Equity as a Prerequisite for Stable Cooperation in a Public-Good Economy - The Core Revisited

Wolfgang Buchholz (wolfgang.buchholz@ur.de) and Wolfgang Peters

No 3113, CESifo Working Paper Series from CESifo

Abstract: In this paper we explore the relationship between an equitable distribution of the cost shares in public-good provision on the one hand and the core property of an allocation on the other. In particular we show that it is an inhomogeneous distribution of cost shares that motivates some coalition of agents to separate and to block an initially given Pareto optimal allocation which can be interpreted as the outcome of a negotiation process when all agents form a grand coalition. Distributional equity of the individual burdens of public-good contribution is assessed by a specific sacrifice measure (the “Moulin sacrifice”) which is derived from the egalitarian-equivalent concept suggested by Moulin (1987). We also develop a simple core test by which it can be checked whether a given allocation is in the core thus being a possible outcome of a cooperative agreement in the public-good economy.

Keywords: public goods; core; equity; stability of cooperation (search for similar items in EconPapers)
JEL-codes: C71 D63 H41 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3113

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