EXISTENCE AND OPTIMALITY OF EXTENDED LINDAHL EQUILIBRIA IN A LARGE PUBLIC GOODS ECONOMY WITH CONGESTION

In this paper, we consider a public goods economy where congestion is present. We assume that the set of consumers is non-atomic, so that each consumer’s individualistic change of utilization of the public goods will not affect the degree of congestion. We formulate a market mechanism where each consumer is charged a Lindahl personalized share for constructing the public goods, together with the common tax rate for the personal utilization of the public goods and the personalized subsidy for allowing some level of congestion. The total amount of this subsidy comes from the taxes that each individual pays for his utilization described above. We will prove that there exist such competitive equilibria under the standard conditions and they are always weakly Pareto optimal. 176 1