Monopoly Markets in Public Goods: the Case of the Uniform All-or-None Price

Abstract

This article explores the provision of a price-excludable public good under conditions of monopoly, in which the monopolist sets a uniform all-or-none price-output package to all consumers. The reasons for interest in this particular monopoly model are twofold First, many public goods are amenable to exclusion on an all-or-none basis. Second, the model does not presume the monopolist to have any information beyond that normally assumed for sellers in private goods markets. The profit-maximizing outcome under these conditions is developed and several striking comparative static results derived. The monopoly outcome is compared with the outcome under the most closely analogous perfectly competitive model (Oakland, 1974). It is shown that, under certain conditions, the monopoly result is superior to the competitive outcome in a welfare sense and indeed that optimality can emerge under monopoly in conditions where it would not under competition. The possibility that the monopolist might oversupply the public good is also explored.