A Note on the Provision of a Public Service of Different Quality

03/31/2020

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by   Monica Anna Giovanniello, et al.

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We study how the quality dimension affects the social optimum in a model of spatial differentiation where two facilities provide a public service. If quality enters linearly in the individuals' utility function, a symmetric configuration, in which both facilities have the same quality and serve groups of individuals of the same size, does not maximize the social welfare. This is a surprising result as all individuals are symmetrically identical having the same quality valuation. We also show that a symmetric configuration of facilities may maximize the social welfare if the individuals' marginal utility of quality is decreasing.