Optimal ownership of public goods under asymmetric information

Consider two parties who can make non-contractible investments in the provision of a public good. Who should own the physical assets needed to provide the public good? In the literature it has been argued that the party who values the public good most should be the owner, regardless of the investment technologies. Yet, this result has been derived under the assumption of symmetric information. We show that technology matters when the negotiations over the provision of the public good take place under asymmetric information. If party A has a better investment technology, ownership by party A can be optimal even when party B has a larger expected valuation of the public good. (c) 2021 Elsevier B.V. All rights reserved.

Automated summary

Ownership of the physical assets needed to provide a public good should be held by the party who values the public good most, but under asymmetric information, investment technology can also play a significant role in determining ownership.