Abstract
This paper investigates the possibility of implementing an efficient provision of a public good through distortionary tax-subsidy policies in a simple one-shot game of voluntary contributions. Within the class of all linear tax-subsidy policies two cases are distinguished. The first is where individual taxes only depend on the sum of all other individuals' contributions. Although such policies may increase total supply of the public good, it is shown that the implementation of an efficient amount is not possible unless the government has complete information about individual characteristics. In the second case, where taxes depend on the distribution of contributions, the equilibrium supply of the public good is no longer unique. For any efficient interior solution there might also exist inefficient boundary solutions. Moreover, unlike the boundary solutions, the efficient interior solution is in general not stable.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.