This paper considers an economy where a public good is provided via advertising. The consumers' preferences are represented using the 'characteristics' approach', and the advertising has a potentially enhancing effect on the characteristics' content of a given commodity. We define competitive equilibria and show they exist. The welfare properties of the resulting allocations are analyzed, and conditions for over- and under-production of the public good are provided.
ASJC Scopus subject areas
- Economics and Econometrics