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

Government may provide a good that can, if legally permitted, be supplemented by private purchases. Policy is determined by majority rule. Under standard assumptions on preferences, a majority voting equilibrium exists. A regime of positive government provision with no restriction on private supplements is shown to be majority preferred to a regime of either only market provision or only government provision. Combined public and private expenditure on the good is higher under this dual-provision regime than under either of the alternatives. Under some preference configurations, the median-income voter is pivotal; under others, a voter with income below the median is pivotal.

Journal Article Aspects of R&D Subsidization Get access Richard E. Romano Richard E. Romano University of Florida Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 104, Issue 4, November 1989, Pages 863–873, https://doi.org/10.2307/2937871 Published: 01 November 1989

Journal Article The Influence of Attitudes Toward Risk on the Value of Forecasting Get access Roger D. Blair, Roger D. Blair Department of Economics, University of Florida Search for other works by this author on: Oxford Academic Google Scholar Richard E. Romano Richard E. Romano Department of Economics, University of Florida Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 103, Issue 2, May 1988, Pages 387–396, https://doi.org/10.2307/1885119 Published: 01 May 1988

Government may provide a good that can, if legally permitted, be supplemented by private purchases. Policy is determined by majority rule. Under standard assumptions on preferences, a majority voting equilibrium exists. A regime of positive government provision with no restriction on private supplements is shown to be majority preferred to a regime of either only market provision or only government provision. Combined public and private expenditure on the good is higher under this dual-provision regime than under either of the alternatives. Under some preference configurations, the median-income voter is pivotal; under others, a voter with income below the median is pivotal.

We review the theoretical, computational, and empirical research on school vouchers, with a focus on the latter. Our assessment is that the evidence to date is not sufficient to warrant recommending that vouchers be adopted on a widespread basis; however, multiple positive findings support continued exploration. Specifically, the empirical research on small-scale programs does not suggest that awarding students a voucher is a systematically reliable way to improve educational outcomes, and some detrimental effects have been found. Nevertheless, in some settings, or for some subgroups or outcomes, vouchers can have a substantial positive effect on those who use them. Studies of large-scale voucher programs find student sorting as a result of their implementation, although of varying magnitude. Evidence on both small-scale and large-scale programs suggests that competition induced by vouchers leads public schools to improve. Moreover, research is making progress on understanding how vouchers may be designed to limit adverse effects from sorting, while preserving positive effects related to competition. Finally, our sense is that work originating in a single case (e.g., a given country) or in a single research approach (e.g., experimental designs) will not provide a full understanding of voucher effects; fairly wide-ranging empirical and theoretical work will be necessary to make progress.