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The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling

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Hellwig,  Martin
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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Citation

Hellwig, M. (2006). The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling.


Cite as: http://hdl.handle.net/11858/00-001M-0000-0028-6E6A-1
Abstract
This paper studies the relation between Bayesian mechanism design and the Ramsey-Boiteux approach to the provision and pricing of excludable public goods. For a large economy with private information about individual preferences, the two approaches are shown to be equivalent if and only if, in addition to incentive compatibility and participation constraints, the .nal allocation of private-good consumption and admission tickets to public goods satis.es a condition of renegotiation proofness. Without this condition, a mechanism involving mixed bundling, i.e. combination tickets at a discount, is superior.