ECO333H1 Final: Tibeout Model
Document Summary
Total cost of providing the public good is divided and paid by residents at the town: median voter decides the equilibrium level of consumption by voting. If all residents have same mb, they will vote unanimously for efficient outcome. If there are many towns, residents motivated to move to town that provides their preferred consumption level. Lindahl"s model: replacing head tax with tax that motivates residence to vote for an efficient equilibrium level. Each vote for their consumption level and is tax accordingly. In reality, impossible to verify and residents have incentives to understate their mb. Options for accommodation n over efficient level: another town, consolidate and have two communities, given same mb, spillover or scale economies exists, consolidation will induce efficiency, given diff mb, if no spillover or scale economies, consolidation decrease surplus. After consolidation, town will vote for the consumption of two town with the mb (they receive from both communities. )
