The Private Provision of Public Goods: A Note on the Demsetz Model

Abstract

In this paper, the authors examine some important unsettled issues in the theory of public goods supply. In particular, certain conclusions and inferences drawn by Professor Demsetz from his “competitive” model of public goods provision are critically examined. First, the equilibrium implications of the Demsetz model are shown to be contingent upon the adoption of a nonstandard concept of competition; second, Demsetz's attempt to apply the joint supply model by analogy to the production of TV programs is challenged; and third, the argument that the private provision of public goods will produce allocative efficiency even if consumers engage in “fraudulent behavior” is shown to contain a serious flaw.

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