The Law od Demand in Tiebout Economies

Edward Cartwright and Myrna Wooders

No 527, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: We consider a general equilibrium local public goods economy in which agents have two distinguishing characteristics. The first is 'crowding type,' which is publicly observable and provides direct costs or benefits to the jurisdiction (coalition or firm) the agent joins. The second is taste type, which is not publicly observable, has no direct effects on others and is defined over private good, public goods and the crowding profile of the jurisdiction the agent joins. The law of demand suggests that as the quantity of a given crowding type (plumbers, lawyers, smart people, tall people, nonsmokers, for example) increases, the compensation that agents of that type receive should go down. We provide counterexamples, however, that show that some agents of a given crowding type might actually benefit when the proportion of agents with the same crowding type increases. This reversal of the law of demand seems to have to do with an interaction effect between tastes and skills, something difficult to study without making these classes of characteristics distinct. We argue that this reversal seems to relate to the degree of difference between various patterns of tastes. In particular, if tastes are homogeneous, the law of demand holds. This paper is to appear in a volume on Tiebout economies, to be published by the Lincoln Institute.

JEL-codes: D46 D71 H41 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/pubs/VUECON/vu05-w27.pdf First version, 2005 (application/pdf)

Related works:
Working Paper: The Law of Demand in Tiebout Economies (2005)
Working Paper: The Law of Demand in Tiebout Economies (2005)
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:van:wpaper:0527

Access Statistics for this paper

More papers in Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by John P. Conley ().