A strategic market game approach for the private provisionof public goods

Abstract

Bergstrom, Blume and Varian [4] provides anelegant game-theoretic model of an economy with one private good and onepublic good. Strategies of players consist of voluntary contributions of theprivate good to public good production. Without relying on first orderconditions, as in prior literature, the authors demonstrate existence ofNash equilibrium. The assumption of one-private good greatly facilities theresults. We provide an analogue of the Bergstrom, Blume and Varian result ina model allowing multiple private and public goods. In addition, we relatethe strategic market game equilibrium to the private-provision equilibriumof Villanacci and Zenginobuz [17], which provides a counter-part to theWalrasian equilibrium for a public goods economy. To obtain our results weintroduce a model of a strategic market game with public goods. Our approachalso incorporates, into the strategic market game literature, economies withproduction.