CONGESTION EFFECTS IN A PUBLIC-GOOD ECONOMY

This paper considers a public-good economy with congestion, where part icipants jointly produce a public good from input of a private good. T his economic model gives rise to a transferable-utility game, the prof it game, that depends on consumer preferences and a congestion paramet er. The simplicity of the game allows the maximum level of congestion that guarantees the nonemptiness of the core of the economy to be dete rmined. It is known that the sustainability of the Lindahl equilibrium in the core of the economy depends on the distribution of profits. In this paper two distributions of profits are compared: the Lindahl sol ution and the marginal-contribution solution. The latter is more often in the core than the Lindahl solution which in turn ''Lorenz-dominate s'' the marginal-contribution solution.