Efficient Mechanisms for Public Goods with Use Exclusions

Abstract

Constrained efficient provision of an excludable public good is studied in a model where preferences are private information. The provision level is asymptotically deterministic, making it possible to approximate the optimal mechanism with a mechanism that provides a fixed quantity of the good and charges fixed user fees for access. In general, the fixed fees involve third degree price discrimination, but, if names are uninformative about preferences, the analysis provides a justification for average cost pricing.

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

“…If one combines the incentive compatibility condition (2.13) for any and 0 = 0 with the participation constraint v(0) Y; one …nds that v( ) Y + P m i=1 i(0) iQi; which is precisely the requirement in question. 1 2 These observations provide a large-economy, multiple-public-goods extension of the …nite-economy, single-public-good impossibility theorems of Güth and Hellwig (1986), Rob (1989), Mailath and Postlewaite (1990), Norman (2004).…”

“…Thus, Schmitz (1997) and Norman (2004) have argued that, to avoid coercion, an excludable public good should be …nanced by admission fees if this is possible. When there is nonrivalry in consumption, admission fees induce an ine¢ ciency, but, in the absence of other sources of funds, this ine¢ ciency is unavoidable if the public good is to be provided at all.…”

“…Regarding the Ramsey-Boiteux analysis, one learns that, when there is a single excludable public good, Ramsey-Boiteux pricing can be identi…ed with a second-best incentive mechanism. Whereas the RamseyBoiteux analysis takes the form of the payment scheme -and thereby the form of the allocation mechanism -as given, the analysis of Schmitz (1997) and Norman (2004) shows that the Ramsey-Boiteux solution cannot be improved upon, even if one allows for more general payment schemes and allocation mechanisms. In particular, nothing is to be gained by allowing for the possibility of providing people with lotteries over admissions and having them pay in accordance with the admission probabilities that are generated by the lotteries.…”

Mechanism Design and Intentions

“…Possible applications include the problem of partnership dissolution (Cramton et al, 1987), public-goods provision (Güth and Hellwig, 1986;Hellwig, 2003;Norman, 2004), the control of externalities (Rob, 1989), or auctions (Myerson, 1981;Bartling and Netzer, 2013). In Section 4.3 below we apply the result in the context of the bilateral trade problem.…”

Optimal democratic mechanisms for taxation and public good provision

“…This latter problem is analyzed in the literature on public good provision under asymmetric information. Recent contributions to this literature include Hellwig (2003), Norman (2004), or Neeman (2004. In these models, individuals differ only in their tastes for a public good.…”