Richard Cornes

The theory of externalities, public goods, and club goods

This book presents a theoretical treatment of externalities (i.e. uncompensated interdependencies), public goods, and club goods. The new edition updates and expands the discussion of externalities and their implications, coverage of asymmetric information, underlying game-theoretic formulations, and intuitive and graphical presentations. Topics investigated include Nash equilibrium, Lindahl equilibria, club theory, preference-revelation mechanism, Pigouvian taxes, the commons, Coase Theorem, and static and repeated games. The authors use mathematical techniques only as much as necessary to pursue the economic argument. They develop key principles of public economics that are useful for subfields such as public choice, labor economics, economic growth, international economics, environmental and natural resource economics, and industrial organization.

The comparative static properties of the impure public good model

Abstract This paper explores the comparative static properties of the impure public good model, in which a privately acquired activity jointly produces a public and a private good. The comparative statics are expressed in terms of familiar income and Hicks-compensated price responses. Unlike the pure public good model, the impure public model can display positively sloped reaction curves even in the absence of income effects. Comparative statics involve changes in price, or income, or the contributions of others, or the proportions in which the joint products are produced. Our representation highlights the influences that make the impure public model different from the public good case.

Independence of Allocative Efficiency from Distribution in the Theory of Public Goods

When is the Pareto optimal amount of public goods independent of income distribution? Subject to some regularity conditions, the answer is when preferences of every individual i can be represented by a utility function of the form U(X_i,Y)=A(Y)X_i+B_i(Y) where X_i is is consumption of private goods and Y is the amount of public goods.

Aggregative Public Good Games

We exploit the aggregative structure of the public good model to provide a simple analysis of the voluntary contribution game. In contrast to the best response function approach, ours avoids the proliferation of dimensions as the number of players is increased, and can readily analyze games involving many heterogeneous players. We demonstrate the approach at work on the standard pure public good model and show how it can analyze extensions of the basic model.

Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility

Abstract We examine the non-cooperative provision of a pure public good by regional governments in a federation similar to the European Union, where regional governments are Stackelberg leaders and the central government is a Stackelberg follower — a federation with decentralized leadership. The center makes interregional income transfers after it observes the contributions to the pure public good. Imperfectly mobile workers react to regional and central governments’ policies by establishing residence in their most preferred region. Despite the degree of labor mobility, we show that the pure public good and interregional transfers are generally allocated efficiently in a federation with decentralized leadership.

The theory of public goods: non-nash behaviour

Abstract Most treatments of equilibrium public goods provision assume zero conjectural variations in the sense that each individual regards the behaviour of the rest of the community as independent of his own. This paper introduces nonzero conjectural variations into the model. A diagram is introduced which can depict both the individuals and the communitys equilibrium in the presence of nonzero conjectural variations. Equilibrium and optimal outcomes are compared, and a specific functional form is used to investigate the effect of community size on the nature of equilibrium. Finally, we discuss the requirement that conjectures should be consistent.

Equilibrium Existence and Uniqueness in Public Good Models: An Elementary Proof via Contraction

This paper presents a proof for existence and uniqueness of a Nash equilibrium of a public good model that exploits a simple contraction mapping. The proof establishes both existence and uniqueness in a single exercise that provides intuition about sufficiency. The method of proof is applied not only to the basic pure public good model but also to the impure model. In the latter model, income normality does not play the same pivotal role for existence and uniqueness. Copyright 1999 by Blackwell Publishing Inc.(This abstract was borrowed from another version of this item.)(This abstract was borrowed from another version of this item.)

Rotten Kids, Purity, and Perfection

Bergstrom has shown that beckers “Rotten Kid theorem” holds in a world of two commodities if their utilities are transferable. The present paper identifies a further circumstance in which the theorem is valid. We show that it also holds in the absence of transferable utility if the externalities are assumed to take the form of a single pure public good.

Gorman and Musgrave are dual: An Antipodean theorem on public goods

This paper finds the conditions under which an allocation branch can determine the efficient amount of public goods to produce, independently of the distribution of private goods. The result is similar to that found in our Econometrica paper, but uses a quite different method--solving a differential equation.

Local public goods, inter-regional transfers and private information

Abstract Suppose that the centre wishes to make transfers between member states of a federation to reduce inequality. However, it lacks precise information concerning the cost differences that are responsible for the initial income inequality. We examine the implications of asymmetric information for the design of the transfer scheme. We show that if member states’ inherent cost levels as local public good providers take discrete values, the first best, or ‘complete information’, transfer scheme may or may not violate incentive compatibility. If inherent cost is a continuous random variable, such a scheme certainly violates incentive compatibility. We also explore the possibility of binding participation constraints. In our model, a binding incentive compatibility constraint leads to a reduction in effort devoted to cost reduction, and a binding participation constraint will also lead to a violation of Samuelsons optimality condition for public good provision.