On the provision of excludable public goods

Self-selecting households consume an excludable public good via enabling expenditures-e.g. on TVs and licence fees for broadcasting. We characterise voluntary consumers at an arbitrary all-or-nothing price, and the optimal price a revenue-constrained welfare-maximiser facing voluntary consumers chooses. These are compared with those from universal provision of the public good via a uniform tax. We show that, inter alia, demand for the good might increase with price; self-selection will produce under-provision. Numerical welfare comparisons show that either mandatory or voluntary participation can be superior, depending on society's income dispersion and inequality aversion.