Equal Sacrifice and Fair Burden Sharing in a Public Goods Economy

Abstract

Applying a willingness to pay approach known from contingent valuation in environmental economics, we first develop an ordinally based specific measure for the size of individual sacrifice that is connected with an agent's contribution to a public good. We then construct a selection mechanism that picks the unique efficient solution among all allocations that have an equal sacrifice as defined in this way. We show that the solution thus obtained does not only correspond to the egalitarian equivalent public good allocation devised by Moulin, but it also has much in common with the older Lindahl equilibrium. Moreover, the equal sacrifice solutions as characterized in this paper conform to both the ability to pay and the benefit principles.