Dynamic Aspects of Public Goods: A Further Analysis of the Telephone System

Abstract

This paper reconsiders a dynamic model of the telephone system developed by Artle and Averous, which for the first time introduces public goods in a dynamic framework. With a more restrictive set of assumptions, their proposition showing self-sustaining growth in the demand for telephones is restated and discussed in detail. Comparative statics of the model are discussed to illuminate further properties which are due to the public good characteristics of the telephone system. Alternative interpretations of the dynamics of the model are given. Finally, a paradigm of urban growth is given to suggest applications of this type of model to other areas of economic analysis.