Lecture 15: public goods and externality
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
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 Excludable Non-excludable Rival Private goods/ Regulated goods Non-rival Club goods Public goods
Public goods • Subscription Excludable Non-excludable Rival Private goods Regulated goods(?) Non-rival Club goods Public goods
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 • 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: is contribution to public goods u, (G, x; ) utility function lifg1+g2≥c G 0 if g,+g<c
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 1 2 1 2 1 if 0 if g g c G g g c + = +