Matching as a Cure for Underprovision of Voluntary Public Good Supply: Analysis and an Example
CESifo, Munich, 2011
CESifo Working Paper No. 3374
Matching mechanisms are regarded as an important instrument to bring about Pareto optimal allocations in a public good economy and to cure the underprovision problem associated with private provision of public goods. The desired Pareto optimal interior matching equilibrium, however, emerges only under very special conditions. But we show in this note that corner solutions, in which some agents choose zero flat contributions, normally avoid underprovision and illustrate and interpret our results by a simple numerical example.
Public Finance
Resources and Environment