Choice between public and private provision of goods, different abilities and imperfect information
Part of : Σπουδαί : journal of economics and business ; Vol.35, No.1-2, 1985, pages 104-108
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104-108
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Abstract:
In this paper we deal with the effects of imperfect information on the choicebetween public and private provision of private goods when individuals differin ability. Although the issues of different abilities and the allocation of publiclyprovided private goods, and the choice between public and private provisionhave been examined separately under conditions of full information by Arrow(1971), Ulph (1977), and the subsequent literature, these issues have never beenlinked together and an explicit treatment of information is a virtually untouchedresearch area. My purpose here is to examine goods which, to the extent thatcost of supply to a person are of our concern, are quite like private goods, butcan be supplied either publicly or privately to different people under conditionsof asymmetry in accurately observing their abilities. That is, imperfect informationis modeled as asymmetric information rather than risk, or uncertainty. Also,examples of the goods in question are either private goods which are a close substitutefor public goods, e.g. security agencies vs. police, or goods such as educationand health care which may not strictly have the properties of an idealized privategood because of externalities.
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