MicroSection4市场失灵外部性公共物品垄断研究报告.pptx

Market Failure When the market does not efficiently allocate resources Monopoly Externalities Public goods Imperfect Information Market Failure Justification for government intervention? Necessary, but not sufficient When decision makers do not consider all costs (or benefits) of their actions Two views Externalities Pigouvian Approach Social Cost = Private Cost + External Cost Cashmere Externalities Pollution Free Market: P1, Q1 Optimal Outcome: P*, Q* cashmere $ D1 Sprivate Q1 P1 P* Q* Ssocial External cost How can society achieve social optimum? ? Impose tax = marginal external cost Free market overproduces goods that generate a negative externality Internalize the externality! “Pigou tax” Getting a ticket for exceeding the speed limit Not studying as much for your econ test as you should have so you get a lower grade than you want Allowing your cell phone to ring in class Getting a flu immunization shot Which of the following is an example of a negative externality? 1 Externalities are due to incomplete property rights assignment Coasian Approach Coasian Approach Coase Theorem If property rights are well-defined and transactions costs are low enough, then private bargaining can result in an efficient outcome. Corollary Efficiency does not depend on initial assignment of property rights. Externalities are due to incomplete property rights assignment Pollution Revisited Cheshire, Ohio v. AEP AEP paid $20 million to buy the 221-resident town in 2002 A factorys production process creates sludge that pours into a river. This sludge makes it difficult to fish in the river, increasing the costs of the local fishermen by $5000. The factory can install a water filter system for $4100, and the fishermen can utilize a weighted fishing net system (to get under the sludge) for $3250. Both systems would remedy the sludge damage to the fishermen. What outcome would you expect under the following con