Lecture+11+October+12

Lecture+11+October+12 - Todays agenda 2009 Nobel Prize...

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Today’s agenda 2009 Nobel Prize Budget lines and budget sets Preferences Indifference curves Optimum consumption bundles Demand curves from indifference curves and budget lines
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2009 Nobel Prize in Economics Oliver Williamson Elinor Ostrom Economic governance Markets v. firms
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Markets and firms as alternative governance structures Differ in how they resolve conflicts of interest Drawback of markets: haggling and disagreement In firms, these problems are smaller; can resolve conflicts through use of authority (though authority can be abused). Markets with many similar sellers and buyers: conflicts tolerable since sellers and buyers can exit and trade with others. Greater their mutual dependence , more likely people are to conduct their transactions inside a firm’s boundary . Degree of mutual dependence: largely determined by extent to which assets can be redeployed outside the relationship. A coal mine and a nearby electric generating plant are more likely to be jointly incorporated the greater the distance to other mines and plants.
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Common-property resources Each person’s consumption reduces availability of the resource to others. Fish stocks, oil pools, oceans, atmosphere Solutions to overexploitation Taxes, quotas, etc. Privatization Leave as common property and let users devise governance rules.
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This note was uploaded on 11/10/2011 for the course ECON 220:102 taught by Professor Rubin during the Fall '11 term at Rutgers.

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Lecture+11+October+12 - Todays agenda 2009 Nobel Prize...

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