We study the effect of voting when insiders’ public goods provision may affect passive outsiders. Without voting insiders’ contributions do not differ, regardless of whether outsiders are positively or negatively affected or even unaffected. Voting on the recommended contribution level enhances contributions if outsiders are unaffected and internalizes the negative externality by lowering contr...

We investigate a private value auction in which a single “entrant”on winning imposes a negative externality on two “regular”bidders. In an English auction when all bidders are active, “regular” bidders free ride, exiting before price reaches their values. In a …rst-price sealed-bid auction incentives for free riding and aggressive bidding coexist, limiting free riding compared to the English au...

We study to what extent collusive behavior is affected by the awareness of negative externalities. Theories outcome-based social preferences suggest that externalities make collusion harder sustain than predicted standard economic theory, while sociological theories ties and intergroup comparisons bilateral cooperation can be strengthened if there exist outsiders gain from cooperative break dow...

A cap on greenhouse gas emissions makes total emissions a fixed commonproperty resource. Population increases under a cap are therefore self-limiting: a population increase raises labor and reduces emissions per unit of labor, which lowers incomes and fertility. Because a marginal birth under a cap lowers all incomes, a cap induces a negative population externality. The externality is substanti...

In a model of majority voting with common values and costly but voluntary participation, we show that in the vicinity of equilibrium, it is always Pareto-improving for more agents, on the average, to vote. This demonstrates that the negative voting externality identified by Borgers(2001) in the context of private values is always dominated by a positive informational externality. In addition, w...

Peer to peer networks will become an increasingly important distribution channel for consumer information goods and may play a role in the distribution of information within corporations. Our research analyzes optimal membership rules for these networks in light of positive and negative externalities additional users impose on the network. Using a dataset gathered from the six largest OpenNap-b...

We study which policy tool and at what level is chosen by majority voting in order to reduce negative externalities, such as pollution. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels ...

The problem of efficient sharing of a resource is nearly ubiquitous. Except for pure public goods, each agent’s use creates a negative externality; often the negative externality is so strong that efficient sharing is impossible in the short run. We show that, paradoxically, the impossibility of efficient sharing in the short run enhances the possibility of efficient sharing in the long run, ev...