Efficient private provision of public goods by rewarding deviations from average

On the possibility of efficient private provision of public goods through government subsidies

“…As in the model suggested by Falkinger (1996), suppose that each individual is subsidized at a constant rate s. Furthermore, suppose that the population is partitioned into subgroups and individuals are taxed on the basis of the average contribution of the subgroup to which they belong. Specifically, are two equilibria where exactly one individual from subgroup II contributes zero.…”

“…It is well known that without any intervention an equilibrium of the game described so far entails underprovision of the public good. Many authors have therefore considered extensions of this model allowing for the possibility that a government subsidizes private contributions (see, among others, Andreoni (1988); Andreoni and Bergstrom (1996); Boadway et al (1989); Brunner and Falkinger (1995);Falkinger (1996) and Roberts (1987), (1992)). In its most general form, such a government intervention may be described as follows.…”

“…In their specification, one has for each i, s 5b (12s ) Another special case of the subsidy scheme described by (2.2) and (2.3) is the model recently proposed by Falkinger (1996). In his model, the population is partitioned into subgroups and each individual is rewarded or penalized on the basis of the average contribution of the subgroup to which the individual belongs (cf.…”

“…Indeed, an example of a subsidy policy where the existence of an efficient interior solution is not the exception is the model recently suggested by Falkinger (1996). In this model, the population is divided into subgroups and each agent's tax only depends on the contributions made by individuals belonging to the same subgroup.…”

“…For the possibility to influence aggregate supply of a public good through subsidies to voluntary contributions in a framework with 'naive' individuals who ignore the government's budget constraint, see Roberts (1987Roberts ( ), (1992 and Boadway et al (1989). Non-neutrality of tax financed subsidies with rational individuals who take into account the government budget constraint has been established in the models of Andreoni and Bergstrom (1996) and Falkinger (1996). equilibrium only if the resulting effective prices for the individuals are the Lindahl prices.…”