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Public Good Provision Under Monopolistic Competition


  • I am thankful to two anonymous referees and one associate editor of this journal for their very helpful comments. This version is substantially revised in light of their comments. This project started when I was visiting the Department of Economics at the National University of Singapore as a postdoctoral fellow. I am thankful to the department for its hospitality. Any remaining errors are my own responsibility.


This paper presents a model of voluntary private provision of public good under monopolistic competition following Pecorino. Consumers prefer product varieties and a public good. Marginal utility of income depends inversely upon the aggregate consumption of private goods in this model. As population size increases, aggregate consumption of private goods goes up and marginal utility of income falls. This explains the positive relationship between population size and public good provision. Any technological changes in the production of private goods are shown to be neutral to the aggregate provision of public good. These results are in contrast to Pecorino.