Competition versus Monopoly in the Supply of Public Goods
In an earlier paper (Güth and Hellwig (1986)), we studied the supply of a public good by a profit-maximizing monopolistic producer. A major finding of our analysis was that the private monopoly supply of a public good is inefficient because, as in the case of a private good, the monopolist makes his supply artificially scarce. In this paper we study the question whether the inefficiency would disappear if there was a sufficient amount of competition among actual or potential providers of the public good.
KeywordsPublic Good Expected Profit Sequential Equilibrium Potential Supplier Revelation Mechanism
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