Given self-protection from an undesirable environmental externality, we examine. under several conditions, the efficiency properties of cooperative and noncooperative behavior. We demonstrate that if self-protection can transfer the externality to another agent, then noncooperative behavior will lead to overprotection. If self-protection filters or dilutes the externality, then noncooperation l...

Positive externalities characterize the consumption of a majority class of information goods and services such as software, e-mail, and online content and services including virtual communities. We show that network externality is critical for the market segmentation and product line decisions of an information goods seller. With externality, a monopoly of multiple existing products offers exac...

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess “leverage” in that parties take on short OTC positions that lead to levels of default risk that are higher than Pareto-efficient ones. In particular, OTC markets feature a c...

In Part I of this two-part paper [1], we proposed a new game, called Chinese restaurant game, to analyze the social learning problem with negative network externality. The best responses of agents in the Chinese restaurant game with imperfect signals are constructed through a recursive method, and the influence of both learning and network externality on the utilities of agents is studied. In P...

We calculate the harm a birth imposes on others when greenhouse gas emissions are a problem and a cap limits emissions damage. This negative population externality, which equals the corrective Pigovian tax on having a child, is substantial in calibrations. In our base case, the Pigovian tax is 21 percent of a parent’s lifetime income in steady state and 5 percent of lifetime income immediately ...

Most of the existing algorithms for fair division do not consider externalities. Under externalities, utility an agent depends only on its allocation but also other agents’ allocation. An has a positive (negative) value assigned goods (chores). This work studies special case externality which we refer to as 2-D. In 2-D, receives or negative unassigned items independent who them. We propose simp...

The term “spam,” as applied to unsolicited commercial email and related undesirable online communication, derives from a popular Monty Python sketch set in a cafe that includes the cannedmeat product SPAM in almost every dish. As the waitress describes the menu with increasing usage of the word “spam,” a group of Vikings in the cafe start singing, “Spam, spam, spam, spam, spam,” drowning out al...

We study the effect of leadership in an experimental threshold public ‘bad’ game, where we manipulate both the relative returns of two investments (the more productive of which causes a negative externality) and the extent to which the gains from leadership diffuse to the group. The game tradeoffs mimic those faced by countries choosing to what degree and when to transition from incumbent pollu...

I provide an economic model with endogenous movements in TFP as a tool for understanding a rationale behind the productivity decline in New Zealand. Cohort quality, measured by a country's human capital distribution determines opportunities for growth. Vintages of human skills are subject to network effects. These network effects, while important for productivity, have the side effect of introd...

Road accidents have the highest externality costs to society and to the economy, even when compared to the externality damages associated with air emissions and oil dependency. Road safety is one of the most complicated topics, which involves many interdependencies, and so, a sufficiently thorough analysis of roadway safety will require a novel system-based approach in which the associated feed...