A Note on the Provision of a Public Service of Different Qualities
General Economics
2021-11-18 v2 Computer Science and Game Theory
Economics
Abstract
We study how the quality dimension affects the social optimum in a model of spatial differentiation where two facilities provide a public service. If quality enters linearly in the individuals' utility function, a symmetric configuration, in which both facilities have the same quality and serve groups of individuals of the same size, does not maximize the social welfare. This is a surprising result as all individuals are symmetrically identical having the same quality valuation. We also show that a symmetric configuration of facilities may maximize the social welfare if the individuals' marginal utility of quality is decreasing.
Keywords
Cite
@article{arxiv.2004.00669,
title = {A Note on the Provision of a Public Service of Different Qualities},
author = {Monica Anna Giovanniello and Simone Tonin},
journal= {arXiv preprint arXiv:2004.00669},
year = {2021}
}