Limited-Rivalry Consumer Goods and Income Distribution – An Exploration

Abstract

Consequences of market provision of consumer goods that are less than fully rival are explored. The feedbacks introduced by limited rivalry are shown to interact with income distribution in ways absent from standard theory. Specifically, it is shown that there may be scope for Pareto improving redistributions, but that the direction of welfare effects of redistributions depend on the number of consumers buying the limitedly rival good. The results are argued to throw light on notions such as innovation and Keynesian underemployment.