An Equilibrium Model with Mixed Federal Structures
Shlomo Weberab,
V. L. Makarovc,
A. V. Savvateevdcaefgh a New Economic School (Moscow)
b Southern Methodist University (Dallas, USA)
c Central Economics and Mathematics Institure RAS (Moscow)
d ISU (Irkutsk)
e MIPT
f DRESP ISC SB RAS (Irkutsk)
g Yandex
h Laboratory of Social Analysis at the Russian Endowment for Science and Education (Moscow)
Abstract:
This paper examines the problem of meeting an inelastic demand for public goods of
club type in an economy with a finite number of agents, who exhibit different preferences
regarding the choice of public projects. The choice problem is assumed to be multidimensional
as there are several dimensions of a societal decision.
From the formal point of view, the problem can be summarized as follows.
There are
$n$ players, identified by points in a multidimensional space, who
should be partitioned into a finite number of groups under the requirement that
there exists no nonempty subset
$S$ of players, each member of which strictly
prefers (in terms of utilities) group
$S$ to the group he was initially allocated.
Utilities which are inversely related to costs consist of two parts: monetary part (inversely proportional to the
group's size), and the transportation part (distance from the location of a
player to the point minimizing aggregate transportation cost within his group).
One cannot hope for a general result of existence of stable coalition structure
even in a uni-dimensional setting. However, by allowing formation of several
coalition structures, each pursuing a different facet of public decision, we obtain
a very general existence result. Formally, this means that for each coalition
there exists a
balanced system of weights assigned to each of the
dimensions of the public project.
Keywords:
equilibrium, regions, federal structures, monetary contribution, equal share.
UDC:
519.83
MSC: 91-02,
91A40
Language: English