Public%20goods%20and%20Externalities - Public goods and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Public goods and Externalities 1 Public Good Traditionally, a public good is de&ned as one with the property that one person&s consumption of the good does not diminish the supply available to others . ("jointness of consumption" or "inapplicability of the exclusion principle" ). Examples of public goods are national defence, infrastructures, ...). The exposition of public goods is essentially that of Samuelson. Consider a model with 2 goods ( x and y ) and 2 consumers ( i = 1 ; 2 ). x ( & 0) is a public good, y is a private good: y i ( & 0) is the quantity of the private good consumed by i: The utility function of agent i is denoted by U i ( x;y i ) [ note that the same quantity x is consumed by all agents i ] : U i : R 2 + ! R is continuous on R 2 + and has all the second order partials and these are continuous on R 2 ++ . The economy has 1 unit of private good; however, there is a technology which can be used to transform the private good into a public good: x = &z is an example of this technology [ z is the quantity of input of private good needed to produce &z of the public good ]; & > : An allocation ( x;y 1 ;y 2 ) & satises x & ;y i & for all i...
View Full Document

This note was uploaded on 12/23/2009 for the course ECON 3130 at Cornell University (Engineering School).

Page1 / 4

Public%20goods%20and%20Externalities - Public goods and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online