CFDP 1441R

Optimal Provision of Multiple Excludable Public Goods

Author(s): 

Publication Date: October 2003

Revision Date: April 2006

Pages: 44

Abstract: 

This paper studies the optimal provision mechanism for multiple excludable public goods when agents’ valuations are private information. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that it involves bundling. Bundling alleviates the free riding problem in large economies in two ways: first, it can increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions.

Keywords: 

Public Goods Provision; Bundling; Exclusion

JEL Classification Codes: H41