A Note on the Efficient Pricing of Public Goods

Abstract

It has been concluded by some that no positive price for a public good is con-sistent with consumption efficiency as it will discourage consumption that could be provided at zero cost. It is argued here that this conclusion is m error because it fails to distinguish between two distinct components ofpublic good consumption: (1) the quantity of the good made available, and (2) the duration of the use of what is available. By developing a model which explicitly considers these two components of consumption it is shown that a pattern of positive "entry" prices exists which will motivate efficiency in both the consumption and provision of a public good.

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