19.8 More on Lindahl equilibrium The analysis of public goods in Chapter 19 exclusively used a model
Question:
19.8 More on Lindahl equilibrium The analysis of public goods in Chapter 19 exclusively used a model with only two individuals. The results are readily generalized to persons-a generalization pursued in this problem.
a. With #persons in an economy, what is the condition for efficient production of a public good? Explain how the characteristics of the public good are reflected in these conditions.
b. What is the Nash equilibrium in the provision of this public good to # persons? Explain why this equilibrium is inefficient. Also explain why the underprovision of this public good is more severe than in the two-person cases studied in the chapter.
c. How is the Lindahl solution generalized to persons? Is the existence of a Lindahl equilibrium guaranteed in this more complex model?
Step by Step Answer:
Microeconomic Theory Basic Principles And Extensions
ISBN: 9780324585377
10th Edition
Authors: Walter Nicholson, Christopher M. Snyder