An alternative way to model merit good arguments



approach the government’s MWP for tobacco will exceed that of the smoking
agent.6

4 An alternative way of modeling merit good
arguments

The previous analysis indicates the need for an approach that ties down in a
more robust way the relationship between the government’s MWP and that of the
consumer. I propose to model this relationship by means of the total willingness-
to-pay (TWP) function in terms of the
numéraire commodity:

F(x,y,u).                                 (11)

This function gives the amount of the numéraire required to bring the con-
sumer at the utility level
u when consuming x and y units of the other two
commodities; its graph is the indifference surface. The marginal willingness to
pay (MWP) for the (de)merit good is then

- xyu    -F2(     ).                    (12)

y

If the government is of the opinion that consumers appreciate the (de)merit
good too (much) little, then a natural way of proceeding is to attribute to the
government the MWP function

-F2g (x,y,u) = -F2(χ,y,u) + μ(y)                   (13)

where μ(y) is (negative) positive for a (de)merit good.7 Notice that (13) does
not directly impose any single crossing in the commodity space because it is
conditional on the utility level
u: the amount of z the consumer believes is
necessary to reach that utility level need not be the same as the amount the
government believes is required. Indeed, integrating this MWP function to a
TWP function gives

y

Fg(χ,y,u) = F(χ,y,u) -    μ(χ)dχ,                  (14)

where yg can be thought of as the level of consumption above which the govern-
ment’s marginal evaluation starts to deviate from the consumer’s.

6 With additive preferences quasi-linear in the numéraire, the (own) elasticity of the inverse
demand schedule is exactly the reciprocal of the (own) Marshallian price elasticity.

7 More complicated modifications of the MWP function are possible, but one should make
sure that for a corresponding TWP function to exist, the cross partial derivatives should be
symmetric:
F2g1 = F1g2 (Frobenius theorem).



More intriguing information

1. The resources and strategies that 10-11 year old boys use to construct masculinities in the school setting
2. Orientation discrimination in WS 2
3. The name is absent
4. The name is absent
5. Strategic Effects and Incentives in Multi-issue Bargaining Games
6. The name is absent
7. Growth and Technological Leadership in US Industries: A Spatial Econometric Analysis at the State Level, 1963-1997
8. The name is absent
9. Rural-Urban Economic Disparities among China’s Elderly
10. The Role of Land Retirement Programs for Management of Water Resources
11. NATURAL RESOURCE SUPPLY CONSTRAINTS AND REGIONAL ECONOMIC ANALYSIS: A COMPUTABLE GENERAL EQUILIBRIUM APPROACH
12. THE DIGITAL DIVIDE: COMPUTER USE, BASIC SKILLS AND EMPLOYMENT
13. Connectionism, Analogicity and Mental Content
14. The storage and use of newborn babies’ blood spot cards: a public consultation
15. The name is absent
16. The name is absent
17. The Response of Ethiopian Grain Markets to Liberalization
18. The name is absent
19. Stakeholder Activism, Managerial Entrenchment, and the Congruence of Interests between Shareholders and Stakeholders
20. The Impact of Individual Investment Behavior for Retirement Welfare: Evidence from the United States and Germany