Lindahl Equilibrium Versus Voluntary Contribution to a Public Good: The role of income distribution
Lindahl equilibria are often seen as an ideal outcome of cooperation in a public-goods economy. But it has also been observed that, if no transfer payments are possible, the Lindahl equilibrium may not be Pareto-superior to the Nash outcome of the voluntary-contribution game. We derive conditions under which agents (or countries in the case of an international public good) will prefer the Lindahl over the Nash solution. In particular we show that rich agents in general are better off in the...[Show more]
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