What is the optimal quantity of public good for the two


Two jurisdictions have preferences described by

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where Gj is the quantity of the local publc good in jurisdction j and yj > 0 is a parameter.

a. What is the optimal quantity of public good for the two jurisdictions?

b. If the public good is centrally provided so that GA = GB, find the quantity that maximizes UA + UB.

c. Calculate the loss from enforcing uniformity of provision.

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Econometrics: What is the optimal quantity of public good for the two
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