PRIVATE CONTRACTS FOR DURABLE LOCAL PUBLIC GOOD PROVISION

This paper presents a model of imperfectly durable local public good provision in a dynamic development framework. The private provision of these goods under contracts between developers and residents of condominium and homeowners' associations is examined. An optimal trajectory of public goods is determined and compared to time consistent contractual trajectories. This comparison is used to explain why developers typically transfer control of maintenance of these goods to residents before the development process ends. The optimal date to transfer control is determined and compared to existing contracts and recommendations in the industry literature. The optimal transfer date is nondecreasing in community size and length of the development process. © 1991.