Lindahl Tax - Drawbacks of Lindahl Pricing

Drawbacks of Lindahl Pricing

There are some drawbacks to Lindahl pricing. Although using Lindahl prices to finance the cost of some public good is often called \benefit pricing", these prices are marginal benefits, not total benefits.

• The main problem with Lindahl pricing is the availability of the relevant and complete information.
• Every person's individual demand curve is required to be known so that a differential price can be charged. This obviously becomes very difficult as a lot of information is required and knowing each individual's demand curve for each good is almost impossible.
• Another problem that arises is that even if we somehow manage to gather all this information, the authenticity of the information is highly questionable, as if people get to know that they will be charged according to their marginal benefits they will tend to under report their demands for the good.