Why Not in Your Backyard? On the Location and Size of a Public Facility

In this paper, we tackle the issue of locating a public facility which provides a public good in a closed and populated territory. This facility generates differentiated benefits to neighborhoods depending on their distance from it. We first characterize the optimal location which would be chosen by a social planner. Then we introduce a common-agency lobbying game, where agents attempt to influence the location decision by the government. When all neighborhoods lobby, the equilibrium solution of the political game replicates the optimal location. This may also be the case when only some neighborhoods lobby. Some non-lobbying neighborhoods may be better off and some lobbying ones worse off than in the case of complete lobbying. This raises the possibility of free-riding at the lobbying stage. Finally, in the case of incomplete lobbying, there is over-capacity of the public facility in the case of a Nimby (Not-in-my-backyard) facility, and under-capacity otherwise