Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class

Amitrajeet Batabyal

MPRA Paper from University Library of Munich, Germany

Abstract: We study the decision problems faced by a city authority (CA) who focuses on two different objectives in her attempt to attract members of the creative class to her city by providing a local public good (LPG). First, we compute the maximum tax that a creative class member is willing to pay to enjoy the LPG on offer by living in the CA’s city. Second, assuming that the CA acts like a “monopolist” interested in maximizing the total benefit to her city, we determine the number of members N to attract to her city and the amount of the LPG L to provide so that the total benefit is maximized. Third, supposing that the CA maximizes the welfare of an individual member, we ascertain the values of N and L that maximize this individual welfare. Finally, we compare and contrast the outcomes that arise from the CA’s focus on these two distinct objectives.

Keywords: City Authority; Creative Class; Local Public Good; Optimal Membership; Tax (search for similar items in EconPapers)
JEL-codes: R11 R50 (search for similar items in EconPapers)
Date: 2020-05-07, Revised 2020-06-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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