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2019 | OriginalPaper | Chapter

3. One-Dimensional Public Goods in Models of Alliance

Authors : Prof. Toshihiro Ihori, Prof. Martin C. McGuire, Shintaro Nakagawa

Published in: International Governance and Risk Management

Publisher: Springer Singapore

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Abstract

An interesting application of non-cooperative private funding of public goods arises in international security and national defense. In their classical article on the economic theory of alliances, Olson and Zeckhauser (1966) demonstrated that countries may allocate some fraction of national income to international (or regional) public goods (for example, special trading agreements, formation of international organizations, military preparedness, active international diplomacy, foreign aid) to reduce regional and international tension and to avoid random emergency costs.

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Appendix
Available only for authorised users
Footnotes
1
Similarly, the budget constraint of country 2 is written as \(c_{2} + G = Y_{2} + g_{1}\).
 
2
In Figs. 3.1 and 3.2, the expansion path is drawn as a ray from the origin. When country 1 has a homothetic preference, its expansion path becomes a ray from the origin as in the figure. If it were not so, its expansion path would not become a ray. Please refer to the textbooks of microeconomics (e.g. Mas-Collel et al. 1995) for the details of expansion path.
 
3
The first fundamental theorem states that every market equilibrium in perfectly competitive markets of private goods is Pareto optimal. Please refer to the textbooks of microeconomics (e.g. Mas-Collel et al. 1995) for the details of the fundamental theorem of welfare economics.
 
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Metadata
Title
One-Dimensional Public Goods in Models of Alliance
Authors
Prof. Toshihiro Ihori
Prof. Martin C. McGuire
Shintaro Nakagawa
Copyright Year
2019
Publisher
Springer Singapore
Book
International Governance and Risk Management

Print ISBN: 978-981-13-8874-3

Electronic ISBN: 978-981-13-8875-0

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-981-13-8875-0_3