The Principal-agent Problem In The Market Provision Of Public Goods And The Suggestions For It

More and more problems took on in the provision of public goods through the market model in our country along with its deepening. How to solve these problems successfully becomes the most important thing to the government. The solution of these problems can make the market provision of public goods go on wheels, and deepen the reform of our country. This dissertation points out definitely that there is a principal-agent relation between the government and the enterprises in the market provision of public goods. This principal-agent relation is a very special one rather than a normal one. The government should adopt different manner in the market provision of public goods according to the profit standard. It should analyze the degrees of the non-exclusive and non-competitive features of public goods. It is uncertain whether the enterprises can make profits in the market because of the different degrees. Therefore, the manner of the market provision should be different, and the measures the government takes should be different. When the enterprises producing public goods can not make profits in the market, the government should give them subsidies rather than let them charge for their public goods. The government should choose the quantity of public goods according to the principle of maximizing the social welfare. Then, it should sign agreements with the enterprises, which include the quantity and the subsidies. When the information is complete, the government makes the two types of enterprises gain normal profits. They will produce the optimal quantity of public goods, and the quantity of the lower cost agent will lower the one of the higher cost agent. In the case of adverse selection, agreements must be able to distinguish the two types of enterprises. Compared to the complete information, the quantity of the lower cost agent doesn't change, but the one of the higher cost agent declines. At the same time, the lower cost agent gains excess profits, while the higher cost agent attains only normal ones. When the quality of public goods is discussed, there is a different conclusion. If the consumers prefer the public goods of higher quality significantly which can not be proved, the government can not distinguish the different cost agents in the case of adverse selection. Then, the government can only offer a pooling agreement. Likewise, the quantity of the pooling agreement lowers the optimal one. And the lower cost agent can gain excess profits, the higher cost agent can still gain normal ones. Dynamic subsidies agreements and setting a higher quality standard are good methods for the government to solve the adverse selection problems. If the enterprises can make profits through the sales of public goods, the government ought not to give them subsidies. Then, the government should use some indirect methods to make the enterprises produce the optimal quantity and quality of public goods, which can maximize the social welfare. If only one agent produces the public goods, the government may impose a price tax on it. In this case, the enterprises'pricing is between the marginal cost pricing and the monopoly pricing. The government ought to determine the reasonable price taxes, which can make the enterprises'pricing equal its average cost, and make the social welfare maximize. Competition is the optimal method to maximize the social welfare. The conclusion of the competition model for two enterprises is that the enterprises'pricing and profits are determined by the diversity of the quality of public goods and the diversity of the marginal cost of two enterprises. Accordingly, the government must set a highest price, establish a higher standard of the quality or an industrial criterion and prevent the collusion of the enterprises in order to maximize the social welfare.