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Equivalence of the Core and Competitive Equilibrium in a Tiebout Economy with Crowding Types
John P. Conley, Myrna H. Wooders
We propose a new model of a local public goods economy with differentiated crowding. The new feature is that taste and crowding characteristics of agents are distinguished from one another. We prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of Tiebout equilibrium outcomes. Equilibrium prices are defined to depend solely on crowding characteristics. This implies that only publicly observable information, and not private information such as preferences, is needed to induce agents to sort themselves into efficient jurisdictions. Thus, our model allows us to satisfy Bewley's (T. Bewley, Econometrica, 49, 713-740, 1981) anonymity requirement on taxes in his well-known criticism of the Tiebout hypothesis.
Journal of Urban Economics, v 41, n 3, May 1997, p421-440 (ID UE962008)
Copyright (C) 1997 Academic Press
Full article (PDF 223K)
"Equivalence of the Core and Competitive Equilibrium in a Tiebout Economy with Crowding Types," (with J. Conley) Journal of Urban Economics 41 (1997) 421-440.