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Title:Incomplete contracts and excludable public goods PDF Logo
Authors:Bierbrauer, Felix
Issue Date:2010
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2010,01
Abstract:We study the provision of an excludable public good to discuss whether the imposition of participation constraints is desirable. It is shown that this question may equivalently be cast as follows: should a firm that produces a public good receive tax revenues, or face a self-financing requirement. The main result is that the desirability of participation constraints is shaped by an equity-efficiency tradeoff: While first-best is out of reach with participation constraints, their imposition yields a more equitable distribution of the surplus. This result relies on an incomplete contracts perspective. With a benevolent mechanism designer, participation constraints are never desirable.
Subjects:Mechanism Design
Incomplete Contracts
Public Goods
Regulation
JEL:D82
D86
H41
L51
Document Type:Working Paper
Appears in Collections:Preprints of the Max Planck Institute for Research on Collective Goods

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