One-Sided Private Provision of Public Goods with Implicit Lindahl Pricing
CESifo, Munich, 2010
CESifo Working Paper No. 3295
We consider a sequential game in which one player produces a public good and the other player can influence this decision by making an unconditional transfer. An efficient allocation requires the Lindahl property: the sum of the two (implicit) individual prices has to be equal to the resource cost of the public good. Under mild conditions this requires a personal price for the providing player that lies below half of the resource cost. These results can, for example, justify high marginal taxes on wages of secondary earners.
Public Finance
Empirical and Theoretical Methods