“Almost” subsidy-free spatial pricing in a multi-dimensional setting |
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Authors: | Jacques Drèze Alexei Savvateev |
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Institution: | a CORE, Catholic University of Louvain, Louvain-La-Neuve, Belgium b Université de Toulouse I, GREMAQ and IDEI, Toulouse, France c Institut Universitaire de France, France d New Economic School, Moscow, Russia e CEPR, UK f Department of Economics, Southern Methodist University, Dallas, TX 75275, USA |
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Abstract: | Consider a population of citizens uniformly spread over the entire plane. The population faces a problem of locating public facilities financed by its users, who face an idiosyncratic private access cost to the facility. We show that, under mild assumptions, an external intervention that covers a tiny portion of the facility cost is sufficient to guarantee secession-proofness or no cross-subsidization, where no group of individuals is charged more than the cost incurred if it had acted on its own. Moreover, we demonstrate that in this case the Rawlsian access pricing is the only mechanism that rules out secession threats. |
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Keywords: | D70 H20 H73 |
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