S10-externalities - ECON 201 1 / 37 Externalities ECON 201...

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Unformatted text preview: ECON 201 1 / 37 Externalities ECON 201 Perloff chapter 17 Perloff chapter 17 Externalities and inefficiency Policy responses Private negotiation & the Coase Theorem ECON 201 2 / 37 Inefficiency and externalities, 17.2 Policy responses, 17.3,17.5 Externalities and inefficiency Perloff chapter 17 Externalities and inefficiency Definition, p600 For example Three settings Setting 1: a two-person game Nash equilibrium Total payoff maximisation Illustration Setting 2: 12.2, competition Perloffs interpretation. . . Market equilibrium Total surplus maximisation Fig 17.1 Apparent conclusion: Setting 3: monopoly Fig 17.5 Policy responses Private negotiation & the Coase Theorem ECON 201 3 / 37 Definition, p600 Perloff chapter 17 Externalities and inefficiency Definition, p600 For example Three settings Setting 1: a two-person game Nash equilibrium Total payoff maximisation Illustration Setting 2: 12.2, competition Perloffs interpretation. . . Market equilibrium Total surplus maximisation Fig 17.1 Apparent conclusion: Setting 3: monopoly Fig 17.5 Policy responses Private negotiation & the Coase Theorem ECON 201 4 / 37 An externality is imposed when: one persons choice affects the payoffs of another person, where this action is not governed by a trade or agreement between the parties For example Perloff chapter 17 Externalities and inefficiency Definition, p600 For example Three settings Setting 1: a two-person game Nash equilibrium Total payoff maximisation Illustration Setting 2: 12.2, competition Perloffs interpretation. . . Market equilibrium Total surplus maximisation Fig 17.1 Apparent conclusion: Setting 3: monopoly Fig 17.5 Policy responses Private negotiation & the Coase Theorem ECON 201 5 / 37 noisy gear changes at 2:00 am carbon emissions nitrogen leaching from dairy farms into shallow lakes traffic congestion passive smoking ... Three settings Perloff chapter 17 Externalities and inefficiency Definition, p600 For example Three settings Setting 1: a two-person game Nash equilibrium Total payoff maximisation Illustration Setting 2: 12.2, competition Perloffs interpretation. . . Market equilibrium Total surplus maximisation Fig 17.1 Apparent conclusion: Setting 3: monopoly Fig 17.5 Policy responses Private negotiation & the Coase Theorem ECON 201 6 / 37 1. small number of participants 2. a perfectly competitive market 3. a market imperfect competition Setting 1: a two-person game Perloff chapter 17 Externalities and inefficiency Definition, p600 For example Three settings Setting 1: a two-person game Nash equilibrium Total payoff maximisation Illustration Setting 2: 12.2, competition Perloffs interpretation. . ....
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This note was uploaded on 05/24/2011 for the course ECON 201 taught by Professor Paulclacott during the Fall '10 term at Victoria Wellington.

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S10-externalities - ECON 201 1 / 37 Externalities ECON 201...

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