Valuation equilibrium revisited

This paper extends the notion of valuation equilibrium which applies to market economies involving the choice of a public environment. Unlike some other recent work, it is assumed here that consumers and firms evaluate alternative environments taking market prices as given (hence this notion is closer to that of competitive equilibria). It is shown that valuation equilibria with balanced tax schemes yield efficient allocations and that efficient allocations can be decentralized as valuation equilibria, with tax schemes that may be unbalanced.