The provision and pricing of excludable public goods: Ramsey-Boiteux Pricing versus bundling

This paper studies the relation between Bayesian mechanism de- sign and the Ramsey-Boiteux approach to the provision and pricing of excludable public goods. For a large economy with private informa- tion about individual preferences, the two approaches are shown to be equivalent if and only if, in addition to incentive compatibility and par- ticipation constraints, the final allocation of private-good consumption and admission tickets to public goods satisfies a condition of renegoti- ation proofness. Without this condition, a mechanism involving mixed bundling, i.e. combination tickets at a discount, is superior.