Lindahl equilibrium embodies a market solution to the problem of providing public goods. Each individual faces personalized prices at which he or she may buy total amounts of the public goods. In equilibrium, these prices are such that everyone demands the same levels of the public goods and thus agrees on the amounts that should be provided. Since individuals buy the total production of public goods, the price to producers is the sum of the prices paid by individuals, and equilibrium involves the supply at these prices equalling the common demand, with costs being shared in proportion to (marginal) benefits.
KeywordsBargaining Efficient allocation Externalities Incentive compatibility Joint production Lindahl equilibrium Lindahl, E. R. Misrepresentation of preferences Missing markets Nash equilibrium Optimality Property rights Public goods Pure public goods Revealed preferences Tax incidence Walras equilibrium
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