AFFINE COST SHARE EQUILIBRIA FOR ECONOMIES WITH PUBLIC GOODS*
*I am grateful to Professor Mamoru Kaneko both for useful suggestions on an earlier draft of this paper and for his encouragement in revising the manuscript. I would like to express my gratitude to the Economics Department seminar participants of the University of Waterloo for their comments when this paper was presented. I would like to thank an anonymous referee of this journal for useful suggestions and for perceptive comments which have improved the quality of presentation. Finally, I would like to thank Prof. Kazuo Nishimura for his interest in this paper and for his suggestions for improving its readability.
Abstract
In this paper we propose the concept of an affine cost-share equilibrium and show that under natural assumptions any optimal allocation corresponds to an affine cost-share equilibrium. With linear cost functions and under mild regularity assumptions we show that an optimal allocation is a ratio equilibrium with redistribution.
