The literature on public goods has shown that efficient outcomes are impossible if participation constraints have to be respected. This paper addresses the question whether they should be imposed. It asks under what conditions efficiency considerations justify that individuals are forced to pay...

This paper examines the consequences of creating a fully competitive market in a sector previously dominated by a cost-minimising public firm. Workers in the economy are heterogeneous in their motivation to work in the sector. In line with empirical findings, our model implies that firms in the...