EEP101_09

EEP101_09 - Eep101/econ 125 lecture 9 Public Goods David...

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Unformatted text preview: Eep101/econ 125 lecture 9 Public Goods David Zilberman Overview H e te ro g e n e ity , N o n -riv a lry , a n d M a rk e t F a ilu re N o n -e x c lu d a b ility a n d M a rk e t F a ilu re O ptim al P rovision w ith H om ogeneous Individuals p P rivate M arket O utcom e for a N on- excludable P ublic G oods p M echanism s for P roviding the S ocially O ptim al L evel of P ublic G oods p T he S pecification of C ongestion C osts in P ublic G oods M odels P u b lic good s are goods or services that can be consum ed by several individuals sim ultaneously N on -rivalry- M ultiple individuals can consum e the sam e good w ithout dim inishing its value. N on -exclu d ab ility , an individual cannot be prevented from consum ing the good . E xam p les, fresh air, a public park, a beautiful view , national defense . Original demand-1 P Q Demand of one individual And the supply Q1 D=a-bQ MC=c-dQ Q 1 = α - χ β + δ D1 Horizontal demand -2 P Q Demand of one individual And the supply Q1 D2H=a-Qb/2 MC=c-dQ Q 2 H = α - χ . 5 β + δ D1 Q2 Horizontal demand -large N P Q Demand of one individual And the supply Q1 DINH=a-Qb/N MC=c-dQ Q N H = α - χ 1 / Ν β + δ DH1 DHN DH2 Q2 QN Vertical aggregation-2 P Q Demand of two individuals And the supply Q1 D2=2a-2bQ MC=c-dQ Q 1 = 2 α - χ 2 β + δ D1 D2 Q2 Vertical aggregation-3 P Q Demand of three individuals And the supply Q1 D3=3a-3bQ MC=c-dQ Q 1 = 3 α - χ 3 β + δ D1 D2 Q2 D3 Q3 Vertical vs horizontal aggregation Horizontal demand lead to infinitely elastic demand at P=a. Vertical leads to infinitely in-ealstic at Q=a/bP=a....
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EEP101_09 - Eep101/econ 125 lecture 9 Public Goods David...

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