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Nathan W Chan and Mirco Dinelli
''Lindahl pricing, three ways''
( 2021, Vol. 41 No.4 )
It is well-known that the Lindahl equilibrium is Pareto optimal in public good economies. However, the details for implementing the Lindahl equilibrium in practice have not been explored in depth. In this note, we demonstrate how the Lindahl mechanism can be interpreted and implemented in three distinct but equivalent ways: 1) a quantity policy, 2) a price policy for a single-payer, or 3) a personalized price policy for n disaggregated consumers with matching transfers. Our exposition bridges different approaches for improving public good provision and has useful parallels to price versus quantity policies for externalities.
Keywords: Lindahl, cost sharing, matching, public goods
JEL: H4 - Publicly Provided Goods: General
D7 - Analysis of Collective Decision-Making: General
Manuscript Received : Jul 28 2021 Manuscript Accepted : Dec 29 2021

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