Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32196
Authors: 
Bierbrauer, Felix
Year of Publication: 
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

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