Instituto de Economía

I compare two different systems of provision of discrete public goods: a centralized system, ruled by a benevolent dictator who has limited commitment power; and an anarchic system, based on voluntary contributions, where there is no ruler. If the public good is binary, then the public good provision problem is merely an informational one. In this environment, I show that any allocation which is implementable in a centralized system and is ex-post individually rational, is also implementable in Anarchy. However, as the number of alternatives available increases, the classical free riding problem described in Samuelson (1954) emerges, and eventually the centralized system becomes the preferred one.