Optimal Ownership of Public Goods under Ideological Conflicts

Abstract

The present paper investigates the optimal ownership structure of public goods in the presence of non-contractible project design decisions. While conventional property rights models suggest that allocating ownership of public goods to a key investor with a lower valuation of the goods can be optimal when the owner dictates the design, the current analysis extends this framework by incorporating a contest to determine design authority. It is shown that when the contest winner determines the project design, allocating ownership of public goods to a non-investor with a lower valuation of the goods can be optimal under intense conflict.