A note on Lindahl equilibria and incentive compatibility

Abstract

We show that if there are Constant Returns to Scale in the production of the public good a) Any Lindahl equilibrium (L.E) is a Hash equilib:-iurn (N.E.) in a price-setting game, b) not all N.E. ~-e L.E., but just those fo:- which the production of the public good is positive and c) the set of L.E. and Strong Equilibria coincide. However if the supply function is continuously differentiable, L.E. is never a N.E. We end the paper with sorne general comments about the nature of the incentive problem.