Private Provision of a public Good? Suppose rA <c and rB <c Then neither A nor B will supply the good alone
Private Provision of a Public Good? Suppose and . Then neither A nor B will supply the good alone. rA c rB c
Private provision of a public Good? Suppose rA <c and rB <c Then neither A nor B will supply the good alone. Yet, if rA+rB>c also, then it is Pareto improving for the good to be supplied
Private Provision of a Public Good? Suppose and . Then neither A nor B will supply the good alone. Yet, if also, then it is Paretoimproving for the good to be supplied. rA c rB c rA + rB c
Private provision of a public Good? Suppose rA <c and rB <c Then neither A nor B will supply the good alone. Yet, if rA +rB>c also, then it is Pareto improving for the good to be supplied A and b may try to free- ride on each other, causing no good to be supplied
Private Provision of a Public Good? Suppose and . Then neither A nor B will supply the good alone. Yet, if also, then it is Paretoimproving for the good to be supplied. A and B may try to free-ride on each other, causing no good to be supplied. rA c rB c rA + rB c
Free-Riding Suppose a and B each have just two actions - individually supply a public good, or not. Cost of supply C= $100. Payoff to a from the good =$80 Payoff to B from the good =$65
Free-Riding Suppose A and B each have just two actions -- individually supply a public good, or not. Cost of supply c = $100. Payoff to A from the good = $80. Payoff to B from the good = $65
Free-Riding Suppose a and B each have just two actions - individually supply a public good, or not. Cost of supply C= $100. Payoff to a from the good =$80 Payoff to B from the good= $65 $80+ $65>$100, so supplying the good is Pareto-improving
Free-Riding Suppose A and B each have just two actions -- individually supply a public good, or not. Cost of supply c = $100. Payoff to A from the good = $80. Payoff to B from the good = $65. $80 + $65 > $100, so supplying the good is Pareto-improving