Indivisibility and preference for collective provision

Abstract

Collective goods are usually defined by comparing per-unit cost, net of congestion, under collective and individual provision. This paper examines preference for the form of provision of indivisible goods, arguing that the public/private or collective/individual dichotomy is an artifice of the assumption that shared goods are perfectly divisible. For indivisible goods, collective provision may be preferred when unit-cost is relatively higher and it may be undesired when unit-costs are lower than private; lower per-unit cost is neither a necessary, nor a sufficient condition. The model provides an explanation of Oates' (Journal of Urban Economics, 1988, pp. 85–94) ‘zoo-effect’.