The Tiebout hypothesis under membership property rights

Theory and Decision 78 (3):457-469 (2015)
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Abstract

We consider the problem of producing an impure public good in various jurisdictions formed through the strategic decisions of agents. Our environment inherits two well-known problems: Under individual decisions, there is a tension between stability and efficiency; Under coalitional decisions, stable jurisdiction structures may fail to exist. The solution, we propose is the use of membership property rights: When a move among jurisdictions is subject to the approval of the agents whom it affects, coalitionally stable jurisdiction structures coincide with those which are efficient.

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