Edgeworth and Lindahl–Foley equilibria of a General Equilibrium Model with Private Provision of Pure Public Goods

In this paper, we propose a definition of Edgeworth equilibrium for a private ownership production economy with (possibly infinitely) many private goods and a finite number of pure public goods. We show that Edgeworth equilibria exist whatever be the dimension of the private goods space and can be decentralized, in the finite and infinite dimensional cases, as Lindahl–Foley equilibria. Existence theorems for Lindahl–Foley equilibria are a by‐product of our results.     

The ratio equilibrium and a voting game in a public goods economy

An economic model of the allocation process with public goods is presented. We define a concept of equilibrium and prove the existence. Next we present a voting game in which a level of the public goods to be produced is decided. We prove that the core of the voting game and the equilibria exist simultaneously, and that they coincide.     

Income Tax and Endogenous Business Cycles

This paper investigates the dynamic implication of balanced–budget rules. We introduce public goods to an overlapping generations model with production and assume that public goods in each period are financed by the labor income taxes. We show that in our model, if the cost of providing public goods is financed by lump–sum taxes, endogenous fluctuations would never occur. But in cases where the government adopts proportional taxes, periodic and chaotic equilibria can exist.     

ESTIMATING THE GENERAL EQUILIBRIUM BENEFITS OF LARGE CHANGES IN SPATIALLY DELINEATED PUBLIC GOODS*

The purpose of this article is to report a new approach for measuring the general equilibrium willingness to pay for large changes in spatially delineated public goods such as air quality. We estimate the parameters of a locational equilibrium model and compute equilibria for alternative scenarios characterizing the availability of public goods within a system of communities. Welfare measures take into consideration the adjustments of households in equilibrium to nonmarginal changes in public goods. The framework is used to analyze willingness to pay for reductions in ozone concentrations in Southern California between 1990 and 1995.     

Constrained public goods in networks

This paper analyses the private provision of public goods where agents interact within a fixed network structure and may benefit only from their direct neighbours’ provisions. We generalise the public goods in the networks model of Bramoullé and Kranton [J. Econ. Theory 135 (2007), pp. 478–494] to allow for constrained provision. In so doing, we characterise Nash equilibria with no intermediate contributors.     

Public goods,voting, and growth

We study a parametric politico‐economic model of economic growth with productive public goods and public consumption goods. The provision of public goods is funded by a proportional tax. Agents are heterogeneous in their initial capital endowments, discount factors, and the relative weights of public consumption in overall private utility. They vote on the shares of public goods in gross domestic products (GDP). We propose a definition of voting equilibrium, prove the existence and provide a characterization of voting equilibria, and obtain a closed‐form solution for the voting outcomes. Also we introduce a “fictitious” representative agent and interpret the outcome of voting as a choice made by a central planner for his benefit. Finally, we undertake comparative static analysis of the shares of public goods in GDP and of the rate of balanced growth with respect to the discount factors and the preferences for public consumption. The results of this analysis suggest that the representative‐agent version of our model is capable of capturing the interaction between many voting heterogeneous agents only if the heterogeneity is one‐dimensional.     

Decentralization of Pareto optima in economies with public projects,nonessential private goods and convex costs

Summary In the theory of economies with public goods one usually considers the case in which private goods are essential, i.e., each agent receives a fixed minimum level of utility if he consumes no private goods, irrespective of the public goods consumed. This paper develops the second welfare theorem for economies with public projects and possibly inessential private goods. As a corollary we also derive conditions under which valuation equilibria exist.hank Dolf Talman and an anonymous referee for many useful remarks and annotations of a previous draft of this paper.     

Coordination and the Provision of Discrete Public Goods by Correlated Equilibria

The strategic analysis of the private provision of a discrete public good has shown the existence of multiple Nash equilibria with the efficient number of players voluntarily contributing. However the coordination issue is left unexplained by this literature. The experimental evidence shows that communication among players is helpful in achieving cooperation. We claim that, from the theoretical point of view, this is equivalent to playing correlated equilibria in an extended public good game with communication, modeled as Chicken. We characterize such equilibria as feasible coordination mechanisms to achieve public goods provision in the general contribution game. We further introduce a second kind of game characterized by payoff externalities that may persist after the minimal threshold of contributors is achieved. While it is easy to show the existence of Pareto efficient correlated equilibria in the first game, in the second one players face incentive problems such that a first best cannot always be an equilibrium. Nevertheless there exist correlated equilibria that can qualify as incentive efficient mechanisms, once free riding is seen as a moral hazard issue. Finally, with an example, we discuss the impact of coalition formation in our framework.     

Efficient Equilibria in the Voluntary Contributions Mechanism with Private Information

We characterize generally the Bayesian Nash equilibria of a voluntary contributions public goods game for two consumers with private information.The two consumers simultaneously make voluntary contributions to the public good, and the contributions are refunded if the total falls short of the cost of the public good. Several families of equilibria (step‐function, regular and semi‐regular) are studied. Necessary and sufficient conditions for regular and semi‐regular equilibrium allocations to be interim incentive efficient are derived. In the uniform distribution case we prove (i) the existence of an open set of incentive efficient regular equilibria when the cost of production is large enough and (ii) the existence of an open set of incentive efficient semi‐regular equilibria when the cost of production is low enough. Step‐function equilibra are proved to be interim incentive inefficient.     

Fooling All of the People Some of the Time: A Theory of Endogenous Sequencing in Confidential Negotiations

We analyse a bargaining game in which one party, called the buyer, has the option of choosing the sequence of negotiations with other participants, called sellers. When the sequencing of negotiations is confidential and the sellers' goods are highly complementary, efficient, non-dissipative equilibria exist in which the buyer randomizes over negotiation sequences. In these equilibria, the buyer can obtain higher pay-offs than in pure strategy equilibria or in public negotiations. The degree of sequencing uncertainty that maximizes buyer pay-offs is inversely related to the aggregate bargaining power of the sellers.     

Existence,uniqueness and some comparative statics for ratio and Lindahl equilibria

We present a rigorous, yet elementary, demonstration of the existence of a unique Lindahl equilibrium under the assumptions that characterize the standard n-player public good model. Indeed, our approach, which exploits the aggregative structure of the public good model, lends itself to a transparent geometric representation. Moreover, it can handle the more general concept of the cost share or ratio equilibrium. Finally, we indicate how it may be exploited to facilitate comparative static analysis of Lindahl and cost share equilibria.      

Cooperative oligopoly equilibrium

Oligopoly cooperation is investigated in an industry with N firms: each firm selects its own output. We show that such oligopoly problems have the same structure as problems of allocating public goods since each firm views its own output as a private good while viewing the outputs of others as public bads. This leads to ‘cooperative oligopoly equilibria’ which are the Lindahl equilibria of the oligopoly model. Agreements are modeled by the selection of a mechanism or ‘game form’ which obeys certain axioms. Under the postulated axioms we show the equivalence of agreed allocations with the set of oligopoly equilibria.It is argued that the principle of ‘Lindahl agreements’ may have wider applications.     

When Does Everyone Contribute in the Private Provision of Local Public Goods?

When does everyone genuinely contribute in the private provision of a local public good? We first introduce a monotonic condition to characterize the relationship between the structure of the network that underlie the noncooperative game of private provision of local public goods on the one hand, and the preferences of the agents on the other, showing that the monotonic condition is a sufficient and necessary condition of existence of a distributed Nash equilibrium (DNE) in which each agent exerts a positive amount of effort to provision of the public good (Theorem 1). We then study the number of equilibria, and, by using the monotonic condition, characterize the condition under which the DNE set is a singleton, a continuum, or null (Theorem 2). As it turns out, the structure of the network and the agents’ preferences jointly shape the effort profile in the provision of local public goods.     

Playing monopoly in the creek: Imperfect competition, development, and in-stream flows

Land ownership and control of development in new and frontier cities is often concentrated. Local public goods, such as wetlands and riparian habitats, can be adversely affected by development. Regulatory pressure to protect these local public goods may not emerge until after some development has occurred. When development rights are insecure, an incentive exists to accelerate early development, an incentive that increases with the number of firms. Further, multiple equilibria may exist, which can result in large increases in development for small increases in the number of firms. When firms are uncertain about how the regulator values the local public good, development may be further accelerated and there may be even more equilibria.     

Participation constraints of matching mechanisms

Matching mechanisms have been proposed to improve public good provision in voluntary contributions. However, such decentralized subsidizing mechanisms may not be Pareto‐improving and may suffer from incomplete information and incredible commitment. This paper examines participation constraints of matching mechanisms with small matching rates in two cases of equilibria. At interior equilibria, there always exist small Pareto‐improving matching schemes regardless of preferences. This universal existence is useful for cooperation among heterogeneous players in the context without global information of preferences or at the international level without central governments. At corner equilibria, matching schemes work in different ways and have distinct welfare effects in certain cases, and the existence of Pareto‐improving matching schemes is not universal but is possible under certain conditions. The paper further characterizes Pareto‐improving matching schemes, and shows that it is easier to reach Pareto‐improving matching outcomes if players value more on public goods and have stronger substitution between private and public goods.     

Chores

We analyze situations where the provision of each of c public goods must be voluntarily assumed by exactly one of n private agents in the absence of transfer schemes or binding contracts. We model this problem as a complete information, potentially infinite horizon game where n agents simultaneously wage c wars of attrition. Providing a public good commits an agent not to take on the provision of another public good for a fixed period. We explore the strategic trade-offs that this commitment ability and the multiplicity of tasks provide. Subgame perfect equilibria (SPEs) are characterized completely for games with two agents and two public goods. For games with two identical agents and c > 1 identical public goods, we establish that an equilibrium that yields a surplus-maximizing outcome always exists and we provide sufficient conditions under which it is the unique equilibrium outcome. We show that under mild conditions, the surplus-maximizing SPE is the unique symmetric SPE. Journal of Economic Literature Classification Number: H41, C72, D13.     

On the completeness of complete markets

We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as being crucial. First, the Arrow–Debreu setting is considered, where markets do not reopen in the future. Second, sequentially complete markets are analyzed, where goods on the spot markets and all contingent one-period ahead commodities can be traded in every state. Finally, complete markets are analyzed, where all possible contingent commodities can be traded at every state. Preferences may be time-consistent or time-inconsistent. A distinction is made between naïve and sophisticated behavior.