SFB 303 Discussion Paper No. A - 326
Author: Ruys, Pieter H. M., Gerard van der Laan, and Dolf J. J. Talman
Title: Signaling devices for the supply of semi-public goods
Abstract: This paper deals with the concept of a semi-public good. These semi-
public goods are characterized by the fact that their use is being
supplemented by specific private goods. The consumption of this
complementary private good is constrained by an individual quantity constraint
for each individual agent. The quantity constraints depend on the level of
the semi-public good. For instance, car driving is limited by the level of
the road system. This approach allows us to design economic institutions
which carry out price discrimination among users of a semi-public good.
People who are seriously hampered by too small a provision of a public good,
because it constrains their use of the private commodity, are willing to
pay a mark-up on the price for the latter one if this mark-up is spent for
expanding the provision of the public good. In the model the availability
of a public good is planned and organized by a central planner. The
consumer's willingness to pay an individual mark-up on the price of a
private commodity reflects his preferences for the availability of the
public good. These mark-ups are collected by the private goods industry
and transferred to the central planner in order to cover the costs of
the public good infrastructure. This framework of a private industry
and a central planner providing semi-public goods is called an
industrial economy. The main issue of this paper is to prove the
existence of an equilibrium in such an economy.
Keywords:
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Creation-Date: January 1990
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