Achieving economic efficiency in the electricity markets through internalizing negative externalities

: Two - Sided Markets with Negative Externalities

This paper analyses a two-sidedmarket in which two platforms compete against each other. One side, the advertisers, exerts a negative externality on the other side, the users. It is shown that if platforms can charge advertisers only, a higher degree of competition for users can lead to higher profits because competition on the advertisers’ side is reduced. If platforms can charge users as well...

Internalizing the externalities of meaning

Market Organization and Efficiency in Electricity Markets

Electricity markets exhibit two different forms of organization: decentralized bilateral trading and centralized auction markets. Using detailed data on prices, quantities, and production costs, we examine how market outcomes changed when a large region in the Eastern US rapidly switched from a bilateral system of trade to an auction market design in 2004. Although economic theory yields ambigu...

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...

Achieving Economic Sustainability Through Innovation

The current economic instability is the result of under regulated markets built on an ideology of free market capitalism and unlimited economic growth. Since the onset of industrialization and conceptualization of economic theories various externalities are not considered as a part of economy. They were assumed to be relatively small and solvable. The consequences that declare an economic model...