Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class

Batabyal, Amitrajeet (2020): Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class.

Abstract

We study the decision problems faced by a city authority (CA) who focuses on two different objectives in her attempt to attract members of the creative class to her city by providing a local public good (LPG). First, we compute the maximum tax that a creative class member is willing to pay to enjoy the LPG on offer by living in the CA’s city. Second, assuming that the CA acts like a “monopolist” interested in maximizing the total benefit to her city, we determine the number of members N to attract to her city and the amount of the LPG L to provide so that the total benefit is maximized. Third, supposing that the CA maximizes the welfare of an individual member, we ascertain the values of N and L that maximize this individual welfare. Finally, we compare and contrast the outcomes that arise from the CA’s focus on these two distinct objectives.

• Item Type: MPRA Paper
• Language: English
• Keywords: City Authority, Creative Class, Local Public Good, Optimal Membership, Tax
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R50 - General

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