An Efficiency Rationale for Bundling of Public Goods

This paper studies the optimal provision mechanism for multiple excludable public goods when agents\' valuations are private information. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that it involves bundling. Bundling alleviates the free riding problem in large economies in two ways: first, it can increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions.