Evaluation of cumulative externality: environmental economics, oligopoly and the private provision of public goods
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This paper evaluates environmental externality when the structure of the externality is cumulative. The evaluation exercise is based on the assumption that the agents in question form conjectural variations. A number of environments are encompassed within this classification and have received due attention in the literature. Each of these heterogeneous environments, however, possesses considerable analytical homogeneity and permit subscription to a general model treatment. These environments include environmental externality, oligopoly and the analysis of the private provision of public goods. We highlight the general analytical approach by focusing on this latter context, in which debate centers around four issues: the existence of free-riding, the extent to which contributions are matched equally across individuals, the nature of conjectures consistent with equilibrium, and the allocative inefficiency of alternative regimes. This paper resolves each of these issues, with the following conclusions: A consistent-conjectures equilibrium exists in the private provision of public goods. It is the monopolistic-conjectures equilibrium. Agents act identically, contributing positive amounts of the public good in an efficient allocation of resources. There is complete matching of contributions among agents, no free-riding, and the allocation is independent of the number of members within the community. Thus the Olson conjecture—that inefficiency is exacerbated by community size—has no foundation in a consistent-conjectures, cumulative-externality, context (212 words).Keywords:
Externality
Private good
Allocative efficiency
Excludability
Monopolistic competition
Free riding
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The paper studies utilitarian welfare maximization in a model with an excludable public good where individual preferences are private information. If inequality aversion is large, optimal allocations involve the use of admission fees and exclusion to redistribute resources from people who benefit a lot from the public good to people who benefit little. If inequality aversion is close to zero, optimal admission fees are zero. These results are robust if earning abilities provide an additional source of heterogeneity and income taxation an additional policy instrument.
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Inequity aversion
Private good
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Excludability
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Private good
Intermediate good
Veblen good
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Excludability
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Abstract Economic institutions are linked to economic growth because they create conditions favourable for production and exchange. Institutions can give a country comparative advantage in producing some goods. If its trading partners lack such institutions, it can still enjoy their benefits by importing these goods. Some institutions, such as intellectual property rights, have non‐excludable benefits because the resulting production is intangible, non‐rival, and often publicly disclosed. The profits, or surplus, that result, however, is rival. Foreign countries can ‘free ride’ on this benefit by misappropriating rival surplus through infringement. This article develops a theory of institutional free riding in which firms in one country free ride on the benefit of foreign institutions to the detriment of their competitor firms and their countries' institutions. It evaluates the incentives of firms and governments for this free riding, its effects, and potential responses to mitigate these effects.
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Free rider problem
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Abstract We study the general equilibrium effects of tariffs, export subsidies, output subsidies and RD subsidies in a monopolistically competitive sector that produces differentiated products. Apart from allocative effects we examine the desirability of these policies from a welfare point of view. It is shown that a small tariff is welfare improving, but that the other instruments result in ambiguous welfare changes. The results depend on identifiable details of the production structure, the sectoral interlinkages through factor markets and preferences. These results are compared to other findings in the literature.
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Abstract This paper presents a model of voluntary private provision of public good under monopolistic competition following Pecorino. Consumers prefer product varieties and a public good. Marginal utility of income depends inversely upon the aggregate consumption of private goods in this model. As population size increases, aggregate consumption of private goods goes up and marginal utility of income falls. This explains the positive relationship between population size and public good provision. Any technological changes in the production of private goods are shown to be neutral to the aggregate provision of public good. These results are in contrast to Pecorino.
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The study examines if free-riding behavior seems to be an explanatory factor when it comes to the variation in municipal aid to EES/EU migrants. The study outlines a descriptive concept of non-excludable municipal welfare based on rational choice theory and argues that in such situations there will exist incentives for free-riding. The study argues that aid to EES/EU migrants constitute a case of such non-excludable welfare and
investigates if there is evidence for free-riding behavior. The study concludes that available statistical data does not support the presence of such a free-riding effect but does not rule it either.
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Excludability
Free rider problem
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