现代观点英文练习册配套课件ch35public goods.pptxVIP

Chapter Thirty-FivePublic GoodsMain IssuesReservation PriceNecessary and Sufficient conditions for providing public good to be Pareto ImprovementFree Riding ProblemLindahl EquilibriumDemand RevelationPublic Goods -- DefinitionA good is purely public if it is both nonexcludable and nonrival in consumption.Nonexcludable -- all consumers can consume the good.Nonrival -- each consumer can consume all of the good.Public Goods -- ExamplesBroadcast radio and TV programs.National defense.Public highways.Reductions in air pollution.National parks.Reservation PricesA consumer’s reservation price for a unit of a good is his maximum willingness-to-pay for it.Consumer’s wealth is Utility of not having the good isReservation PricesA consumer’s reservation price for a unit of a good is his maximum willingness-to-pay for it.Consumer’s wealth is Utility of not having the good isUtility of paying p for the good isReservation PricesA consumer’s reservation price for a unit of a good is his maximum willingness-to-pay for it.Consumer’s wealth is Utility of not having the good isUtility of paying p for the good isReservation price r is defined byReservation Prices; An ExampleConsumer’s utility isUtility of not buying a unit of good 2 isUtility of buying one unit of good 2 atprice p isReservation Prices; An ExampleReservation price r is defined byI.e. byWhen Should a Public Good Be Provided?One unit of the good costs c.Two consumers, A and B.Individual payments for providing the public good are gA and gB.gA + gB ? c if the good is to be provided.When Should a Public Good Be Provided?Payments must be individually rational; i.e.andWhen Should a Public Good Be Provided?Payments must be individually rational; i.e.andTherefore, necessarily andWhen Should a Public Good Be Provided?And ifandthen it is Pareto-improving to supply the unit of goodWhen Should a Public Good Be Provided?And ifandthen it is Pareto-improving to supply the unit of good, so is sufficient for it to be efficient to supply