If average cost is everywhere above market demand, it is usually argued that the nondiscriminating firm will shut down, although the first-best outcome may dictate production. In this setting, it is shown that there is often a Nash equilibrium in consumption that will keep the firm producing. Selfish consumers engage in excessive (beyond demand) consumption to keep the firm in business and to protect their surpluses. This is shown to be true in a simple model with perfect information and also in a more realistic model in which consumers are uncertain about the firm's costs.

A theoretical and computational model with tax-financed, tuition-free public schools and competitive, tuition-financed private schools is developed. Students differ by ability and income. Achievement depends on own ability and on peers' abilities. Equilibrium has a strict hierarchy of school qualities and two-dimensional student sorting with stratification by ability and income. In private schools, high-ability, low-income students receive tuition discounts, while low-ability, high-income students pay tuition premia. Tuition vouchers increase the relative size of the private sector and the extent of student sorting, and benefit high-ability students relative to low-ability students