The overprovision anomaly of private public good supply |
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Authors: | Wolfgang Buchholz Wolfgang Peters |
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Institution: | (1) Present address: Department of Economics, University of Regensburg, D-93040 Regensburg, Germany;(2) Present address: Department of Economics, European University Viadrina, P.O. Box 1786, D-15207 Frankfurt/Oder, Germany |
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Abstract: | It is well known that private provision of a public good may lead to a higher supply than that in some Pareto optimal allocation. The traditional view attributes this overprovision anomaly to a specific kind of preferences. The present paper, however, shows that preferences do not play a decisive role. Assuming normality, overprovision will occur only if the distribution of income is extremely skewed and Pareto optimal allocations are not within the set of cost-share equilibria. |
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