Optimality Conditions for Public and Private Goods

Abstract

In general, the optimal provision of a good requires the simultaneous choice of (a)the optimal scale of output given the proportions in which consumers are allocated this total, and (b)the optimal consumption shares given the total available. With public goods the shares are not variable. The usual optimality conditions for private goods collapse (a) and (b) together. Here a general optimality rule for (a) is developed and related to the traditional efficiency rules for public and private goods.