On the provision of excludable public goods

Abstract Self-selecting households consume an exclusable public good via enabling expenditures-e.g. on TVs and licence fees for broadcasting. We characterise voluntary consumers at an arbitrary all-or-nothing price, and the optimal price a revenue-constrained welfare-maximiser facing voluntary consumers chooses. These are compared with those from universal provision of the public good via a uniform tax. We show that, inter alia, demand for the good might increase with price; self-selection will produce under-provision. Numerical welfare comparisons show that either mandatory or voluntary participation can be superior, depending on society's income dispersion and inequality aversion.

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