No. 556: Anonymous Price Taking Equilibrium in Tiebout Economies with Unbounded Club Sizes
March 1, 2006
We introduce a model of a local public goods economy with a continuum of agents and jurisdictions with finite, but unbounded populations. Under boundedness of per capita payoffs we demonstrate nonemptiness of the core of the economy. We then demonstrate that the equal treatment core coincides with the set of price-taking equilibrium outcomes with anonymous prices - that is, prices for public goods depend only on observable characteristics of agents. Existence of equilibrium follows from nonemptiness of the core and equivalence of the core to the set of equilibrium outcomes. Our approach provides a new technique for showing existence of equilibrium in economies with a continuum of agents.
J.E.L classification codes: C62, D71, H41
Keywords:Tiebout, Clubs, Jurisdictions, F-core, Core-equilibrium equivalence, Edgeworth equivalence, Continuum economies with clubs, Crowding types, Core, Equal treatment core