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Journal Article

Public-Good Provision with Many Participants

Martin F. Hellwig
The Review of Economic Studies
Vol. 70, No. 3 (Jul., 2003), pp. 589-614
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/3648602
Page Count: 26
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Public-Good Provision with Many Participants
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Abstract

For a nonexcludable public good with benefit and cost functions independent of the number of participants, this paper studies second-best allocations under Bayesian interim incentive compatibility and interim individual rationality. As the number of participants becomes large, second-best provision levels converge in distribution to first-best levels if the latter are bounded. Second-best provision levels become large in absolute terms but small relative to first-best levels if benefit and cost functions are isoelastic. In contrast, for an excludable public good, the ratio of second-best to first-best levels is bounded away from zero.

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