Optimal Fiscal Community:

 In order  to examine the optimum number of fiscal communities and the number of people within each community, it is assumed that there exists only one public service and the benefit incidence is confined to all within a geographical area. The benefit incidence of the service vanishes beyond this geographical region. The second assumption is that consumers have identical tastes and incomes. Thirdly, service or good in question is a pure public good so that its quality received by per person is not affected by the number of participants. It may be understood that the cost to each person would be  less if the number of residents in the region partaking  the service is larger. So,  the efficient solution suggests that all consumers  congregate in the same benefit region. It follows that such a cost sharing and the resultant savings due to large numbers leads to a unitary structure. However, there may be disadvantages  like crowding associated with the saving costs if the number of persons increases in a geographical size. So the optimal community size need to be decided by striking a balance between the advantage of sharing in the cost of a given level of public service and the disadvantages of crowding. The following analysis is based on the celebrated article "An Economic Theory of Clubs" published in Economica in 1965 by J.M.Buchanan. It  is assumed that people are having same preferences and income and also that services are pure public goods.