Professor Danielsson (this journal 2000) argues that congestion externalities are solved if individual transferable quotas (ITQs) are introduced. This is in direct contrast to my own research (Boyce 1992, Corollary 1, p. 399). Danielsson raises an interesting question about how congestion externalities should be modeled. However, I argue that my own result is fundamentally correct, based on the...

We study truthful mechanisms in the context of cake cutting when agents not only value their own pieces of cake but also care for the pieces assigned to other agents. In particular, agents derive benefits or costs from the pieces of cake assigned to other agents. This phenomenon is often referred to as positive or negative externalities. We propose and study the following model: given an alloca...

The interdependency of information security risks poses a significant challenge for firms to manage security. Firms may overor under-invest in security because security investments generate network externalities. In this paper, we explore how firms can use three risk management approaches, third-party cyberinsurance, managed security service (MSS) and risk pooling arrangement (RPA), to address ...

Transport generates many externalities, some related to atmospheric pollution. In this paper, we focus on two: greenhouse gases, and local pollution. In the search for optimal transport policies, these two externalities have usually been analysed separately. Here, we study them jointly, in a sequential decision-making model. Our model allows for the irreversibility of the policies undertaken, a...

Contests are a common method to describe the distribution of many di¤erent types of rents. Yet in many of these situations the utilisation of the prize plays an important role in determining agents’payo¤s and incentives. In this paper, we investigate the incentives to expend e¤ort for a prize that produces consumption externalities and consider alternative regulatory policies. We …nd relatively...

We study a first price auction preceded by a negotiation stage, during which bidders may form a bidding ring. We prove that in the absence of external effects the all-inclusive ring forms in equilibrium, allowing ring members to gain the auctioned object for a minimal price. However, identity dependent externalities may lead to the formation of small rings, as often observed in practice. Potent...

Until recently, computational aspects of the Shapley value were only studied under the assumption that there are no externalities from coalition formation, i.e., that the value of any coalition is independent of other coalitions in the system. However, externalities play a key role in many real-life situations and have been extensively studied in the game-theoretic and economic literature. In t...

We construct a new systemic risk measure that quantifies vulnerability to fire-sale spillovers using detailed regulatory balance sheet data for U.S. commercial banks and repo market data for broker-dealers. Even for moderate shocks in normal times, fire-sale externalities can be substantial. For commercial banks, a 1 percent exogenous shock to assets in 2013:Q1 produces fire-sale externalities ...

In this paper the one-seller/two-buyer problem with buyer externalities is investigated under the assumption that the two buyers have legal opportunities to cooperate. It is shown that the Competitive equilibrium and the Core are robust with respect to negligible externalities and that the range of market prices in the Core belongs to range of Competitive equilibrium prices. However, these conc...