Summary.
Using a general equilibrium framework, this paper analyzes the equilibrium provision of a pure public bad commodity (for example pollution). Considering a finite economy with one desired private good and one pure public “bad” we explicitly introduce the concept of Lindahl equilibrium and the Lindahl prices into a pure public bad economy. Then, the Lindahl provision is analyzed and compared with the Cournot-Nash provision. The main results for economies with heterogeneous agents state that the asymptotic Lindahl allocation of the pure public bad is the null allocation. In contrast, the asymptotic Cournot-Nash provision of the public bad might approach infinity. Other results were obtained in concert with the broad analysis of the large finite economies with pure public bad commodities.
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Received: July 26, 2001; revised version: March 12, 2002
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ID="*" We are indebt to Nicholas Yannelis and anonymous referee for their valuable comments and suggestions.
Correspondence to: B. Shitovitz
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Shitovitz, B., Spiegel, M. Cournot-Nash and Lindahl equilibria in pure public “bad” economies. Econ Theory 22, 17–31 (2003). https://doi.org/10.1007/s00199-002-0282-y
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DOI: https://doi.org/10.1007/s00199-002-0282-y