The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling

Martin Hellwig

No 04-02, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: This paper studies the relation between Bayesian mechanism design and the Ramsey-Boiteux approach to the provision and pricing of excludable public goods. For a large economy with private information about individual preferences, the two approaches are shown to be equivalent if and only if, in addition to incentive compatibility and participation contraints, the final allocation of private-good consumption and admission tickets to public goods satisfies a condition of renegotiation proofness. Without this condition, a mechanism involving mixed bundling, i.e. combination tickets at a discount, is superior.

Pages: 31 pages
Date: 2004-02-03
Note: Without implicating them, I thank Felix Bierbrauer, Christian Hellwig, and Peter Norman for helpful discussions. I am also grateful for research support from the Deutsche Forschungsgemeinschaft through Sonderforschungsbereich 504 at the University of Mannheim.
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Related works:
Journal Article: The provision and pricing of excludable public goods: Ramsey-Boiteux pricing versus bundling (2007)
Working Paper: The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling (2006)
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