This paper uses spatial econometrics to analyze air pollution externalities. State-by-state source-receptor transfer coefficients that can be used as a basis for a location-differentiated permit system are estimated. Results affirm the importance of regional transport in determining local ozone air quality, although owing to non-monotonicities in ozone production the externality is not always n...

Using a model of nonlinear decay of the stock pollutant, and starting from the same initial conditions, the paper shows that an optimal tax that corrects for both stock and ßow externalities may result in a lower tax, fewer cumulative emissions (less decay) and higher output at the steady state than a corrective tax that ignores the ßow externality. The “more is less” result emphasizes that set...

One of Coase’s central insights is that distinguishing between the generator and recipient of an externality is of limited value because externality problems are reciprocal. We reconsider the relevance of the identity of the generator in a model with non-contractible investment ex ante but frictionless bargaining over the externality ex post. In this framework, a party may distort its investmen...

I study optimal monetary policy in an expectational Phillips Curve environment in which private agents optimally choose their amount of information pertinent to predicting policy. ARCH shocks produce interesting information acquisition (IA) dynamics. Under discretion, IA dynamics cause time-varying effectiveness of policy because of the expectational Phillips Curve; policy may be rendered compl...

In this paper we discuss marketing strategies for goods that have positive network externalities, i.e., when a buyer’s value for an item is positively influenced by others owning the item. We investigate revenue-optimal strategies of a specific form where the seller gives the item for free to a set of users, and then sets a fixed price for the rest. We present a 1 2 -approximation for this prob...

This paper examines the optimal (first-best) fiscal policy in a stochastic, infinite-horizon representative agent model that exhibits a “keeping up with the Joneses” utility function and imperfectly competitive product markets. We find that the optimal labor tax is a constant, whose sign is determined by the relative strength of consumption externality and monopoly power. Moreover, the optimal ...

In the framework of a search and matching model, when search effort enters the labor market matching function, search effort by one worker generates a negative externality on other workers searching for jobs. The solution to the social planner’s problem may not be decentralized in a competitive market. Calibration shows that the current US unemployment insurance (UI) system generates an 8.07% w...

A survey of the economic impact of climate change and the marginal damage costs shows that carbon dioxide emissions are a negative externality. The estimated Pigou tax and its growth rate are too low to justify the climate policy targets set by political leaders. A lower discount rate or greater concern for the global distribution of income would justify more stringent climate policy, but would...

Many studies show that asymmetric information exists in insurance markets, yet there is little consensus on the e↵ectiveness of interventions in these markets. This article provides empirical evidence that improving information about risk is not always welfare-improving. I show how the theoretical e↵ect of risk-rating can depend on whether the market is adverselyor advantageously-selected. I th...

Abstract This paper develops a Nash bargaining model of price formation in the art market. Agents can be naïve, if they are overconfident and either overestimate artistic quality or underestimate their uncertainty quality, sophisticated, correctly use all available information. Overconfidence turns out to have positive impact on both average artworks traded The overconfidence expected is weaker...