Internalizing Environmental Externalities and the Coase Theorem

Detrimental externalities , pollution rights , and the “ Coase theorem ”

This paper, which builds on Chipman (The economist’s vision. Essays in modern economic perspectives, 131–162, 1998), analyzes a simple model formulated by Hurwicz (Jpn World Econ 7:49–74, 1995) of two agents—a polluter and a pollutee—and two commodities: “money” (standing for an exchangeable private good desired by both agents) and “pollution” (a public commodity desired by the polluter but und...

Network Externalities and the Coase Conjecture

This paper addresses two general questions. First, what is the eeect of market structure on the development of a network in a dynamic model with rational expectations? Secondly, is the intuition that network externalities arèeco-nomies of scale on the demand side' correct? These questions are examined in a model of durable goodproduction in the presence of network externalities. Two results are...

Internalizing the externalities of meaning

The Becker - Coase Theorem Reconsidered ∗

We reconsider the well known Becker Coase (BC ) theorem according to which changes in divorce law should not affect divorce rates. We do that in a context of households that consume public goods in addition to private goods. For the Becker-Coase theorem to hold in this setting, utility must be transferable both within marriage and upon divorce, and the marginal rate of substitution between publ...

The Incentive Costs of Internalizing Externalities *

We present a dynamic agency model in which changes in the structure of a firm affect its value due to altered incentives. There may be disadvantages in merging two firms even when such a merger allows the internalization of externalities between the two firms. Merging, by making unprofitable certain decisions, increases the cost of inducing managers to exert effort. ∗Mailath and Postlewaite gra...