Equilibrium in a Finite Local Public Goods Economy

Abstract This paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi-linear preferences. Jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax. We show that under a proportional income tax scheme a Nash equilibria may fail to exist. Under a poll tax scheme an equilibrium always exists but, in general. Nash equilibria violate a very weak efficiency condition. We conclude by commenting on the stabilizing effect of zoning policies.Journal of Economic LiteratureClassification Number: C71.

[1]  P. Jehiel,et al.  Constitutional Rules of Exclusion in Jurisdiction Formation , 1998 .

[2]  Shlomo Weber,et al.  Pure Strategy Nash Equilibrium in a Group Formation Game with Positive Externalities , 1997 .

[3]  M. Breton,et al.  Free mobility equilibrium in a local public goods economy with congestion , 1997 .

[4]  Debraj Ray,et al.  Equilibrium Binding Agreements , 1997 .

[5]  Andrew Caplin,et al.  Competition among Institutions , 1997 .

[6]  Hideo Konishi.  Voting with Ballots and Feet: Existence of Equilibrium in a Local Public Good Economy , 1996 .

[7]  Roger Guesnerie,et al.  A contribution to the pure theory of taxation , 1996 .

[8]  R. Gilles,et al.  Decentralization in Replicated Club Economies with Multiple Private Goods , 1995 .

[9]  The Pure Theory of Public Goods: Efficiency, Decentralization, and the Core , 1994 .

[10]  G. Demange.  Intermediate Preferences and Stable Coalition Structures , 1994 .

[11]  D. Epple,et al.  Existence of voting and housing equilibrium in a system of communities with property taxes , 1993 .

[12]  John P. Conley.  Convergence Theorems on the Core of a Public Goods Economy , 1994 .

[13]  M. Kaneko,et al.  Continuum economies with finite coalitions: Core, equilibria, and widespread externalities , 1989 .

[14]  Roger Guesnerie,et al.  Increasing Returns to Size and their Limits , 1988 .

[15]  M. Wooders,et al.  Competitive equilibrium and the core in club economies with anonymous crowding , 1987 .

[16]  Shlomo Weber,et al.  Strong tiebout equilibrium under restricted preferences domain , 1986 .

[17]  S. Zamir,et al.  Proportional Taxation: Nonexistence of Stable Structures in an Economy with a Public Good* , 1985 .

[18]  Thomas Romer,et al.  Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice , 1984 .

[19]  Roger Guesnerie,et al.  Second best taxation as a game , 1981 .

[20]  T. Bewley.  A Critique of Tiebout's Theory of Local Public Expenditures , 1981 .

[21]  M. Wooders.  The Tiebout Hypothesis: Near Optimality in Local Public Good Economies , 1980 .

[22]  Andreu Mas-Colell,et al.  Efficiency and Decentralization in the Pure Theory of Public Goods , 1980 .

[23]  Bryan Ellickson,et al.  Competitive equilibrium with local public goods , 1979 .

[24]  Ehud Kalai,et al.  A group incentive compatible mechanism yielding core allocations , 1979 .

[25]  M. Wooders.  Equilibria, the core, and jurisdiction structures in economies with a local public good , 1978 .

[26]  Jean-Michel Grandmont,et al.  INTERMEDIATE PREFERENCES AND THE MAJORITY RULE , 1978 .

[27]  Frank Westhoff,et al.  Existence of equilibria in economies with a local public good , 1977 .

[28]  Bruce W. Hamilton.  Zoning and Property Taxation in a System of Local Governments , 1975 .

[29]  J. Henderson,et al.  Public goods, efficiency, and regional fiscal equalization , 1974 .

[30]  R. Rosenthal.  A class of games possessing pure-strategy Nash equilibria , 1973 .

[31]  Robert J. Aumann,et al.  16. Acceptable Points in General Cooperative n-Person Games , 1959 .

[32]  Charles M. Tiebout.  A Pure Theory of Local Expenditures , 1956, Journal of Political Economy.

[33]  Philip Wolfe,et al.  Contributions to the theory of games , 1953 .