Equilibrium in a Finite Local Public Goods Economy

Abstract

This paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi-linear preferences. Jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax. We show that under a proportional income tax scheme a Nash equilibria may fail to exist. Under a poll tax scheme an equilibrium always exists but, in general. Nash equilibria violate a very weak efficiency condition. We conclude by commenting on the stabilizing effect of zoning policies.Journal of Economic LiteratureClassification Number: C71.