Abstract
The failure of the price system to achieve an efficient resource allocation of public goods has long been recognized. One can analytically dissect this market failure within the Lindahl structure. As it is well known, the latter is an attempt to mimic the Walrasian model to the case of public goods. In the Lindahl framework, individual agents act as conventional utility maximizers, choosing the levels of public services they desire given their tax shares (responding passively, that is, to parameterically given prices). The “auctioneer” adjusts prices ensuring that individual choices are mutually consistent. In equilibrium, tax shares are set at the individualized marginal valuations.
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© 1986 Kluwer-Nijhoff Publishing
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Rob, R. (1986). The Demand Revealing Mechanism. In: Samuelson, L. (eds) Microeconomic Theory. Recent Economic Thought Series, vol 6. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-4219-6_6
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DOI: https://doi.org/10.1007/978-94-009-4219-6_6
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