Lecture 14public goods and externality(微观经济学(浙大- 叶剑亮)).pptVIP

Lecture 15: public goods and externality Content Public goods Subscription Efficient provision of public goods Public choice Externality What’s externality? How to solute it? What’s the efficient condition with externality. Public goods Subscription Public goods Subscription Excludability is the property problem Rivality is the physical problem. Y.Barzel(1989), Public domain Price determined by the property. Public goods Efficient provision of public goods Discrete case: xi : private goods G: public goods gi: i’s contribution to public goods ui(G,xi), utility function Public goods Discrete case: benchmark If providing the public goods will Pareto dominate non. So ri: the reservation price of i. Public goods Then will get: The sum of reservation price exceeds the cost of public goods, it’s efficient to provide the public goods. Public goods But, can private provide it? Reflection function: If: Non cooperation equilibrium (0,0) Public goods Voting: Public goods Continuous case: Social welfare function: Public goods Continuous case: Benchmark: Public goods Samuelson condition: Public goods Private provision By Kuhn-Tucker first order condition: See the fig. Public goods A Nash equilibrium: The equation holds for one i at least. If the utility is quasi-linear, then we have : If ,then 2 to be the free-rider. Public goods When there is no free-rider? For 1, Or Public goods Let be the demand for public goods of his wealth. We have: And in the same way, we got: Public goods If utility is quasi-linear, If , then and If , then Public goods Insufficient provision of public goods While, Let Then: For So Public goods Voting: Paradox of voting (Condorcet paradox) Single-peaked preference (i pay fraction si for G), has a unique maximum. Majority rule and median voter. Bowen equilibrium