17.7 More on Lindahl equilibrium The analysis of public goods in this chapter exclusively used a model
Question:
17.7 More on Lindahl equilibrium The analysis of public goods in this chapter exclusively used a model with only two individuals. The results are readily generalised to n persons – a generalisation pursued in this problem.
a. With n persons in an economy, what is the condition for eficient production of a public good? Explain how the characteristics of the public good are relected in these conditions.
b. What is the Nash equilibrium in the provision of this public good to n persons? Explain why this equilibrium is ineficient Also explain why the under provision of this public good is more severe than in the two-person cases studied in the chapter.
c. How is the Lindahl solution generalised to n 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: 9781473729483
1st Edition
Authors: Christopher M Snyder, Walter Nicholson, Robert B Stewart