17.7 More on Lindahl equilibrium The analysis of public goods in this chapter exclusively used a model

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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?

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Microeconomic Theory Basic Principles And Extensions

ISBN: 9781473729483

1st Edition

Authors: Christopher M Snyder, Walter Nicholson, Robert B Stewart

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