ON THE SET OF PARETO EFFICIENT ALLOCATIONS IN ECONOMIES WITH PUBLIC-GOODS

We examine the set of Pareto-efficient allocations in economies with p ublic goods. We show that even if preferences are continuous and stron gly monotonic, it need not coincide with the set of weakly efficient a llocations. We then study topological propel ties of the Pareto set. W e show that it is neither connected nor closed in allocation space. Fu rthermore, if the public goods are local, the image of the Pareto set in utility space need not be closed or connected. We provide two indep endent sufficient conditions for the closedness of the Pareto set. The results are directly applicable to private goods economies with joint production. Our results should be of interest for general equilibrium and mechanism design theory; where for example, the properties of the efficient set are important for proving the existence of an equilibri um and for the study of the properties of monotone-path social choice correspondences.