ABSTRACT
II II can be realized by consumers of type 1 on their own at the proper supply of public goods. Similarly, consumers of type 2 can obtain utility allocations on I I without needing consumers of the other type to share costs. Let z~ and z~ denote the supply of public goods which leads to the highest utility levels u~ and u~, respectively, attainabk in agglomerations with only one consumer type. In Figure 2, obviously, parameters are chosen such that
z~ = ZO and such that z~ of z~ because u~ = uf and u~ < u~. For an agglomeration with type i = 2 only being present, the level of supply
z~ would not be optimal. The example of Figure 2 will be further discussed in Section 5.2
which deals with the notion and existence of Tiebout equilibria. The case with more than two types and locations could be analysed along similar lines though, of course, at greater combinatorial effort. In any case, our findings on the assignment problem at a fixed supply of public goods turn out to be a useful first step towards understanding the more complicated first best problem to be studied in the next section.
