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...

Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not undergone formal peer review or the editorial treatment accorded RFF books and other publications. Abstract Uncertainty about costs causes otherwise equivalent price and quantity controls to result in different quantity responses and costs. Weitzman (1974) found that th...

This study investigates the relationship between information technology (IT) expenditures and national productivity based on a production estimation approach by using pooled time-series country-level data set for the period from 1992 to 2000. The results confirm the findings of earlier studies on country-level IT investment effect, showing IT to have significant and positive effects on national...

With the advent of social networks such as Facebook and LinkedIn, and online offers/deals web sites, network externalties raise the possibility of marketing and advertising to users based on influence they derive from their neighbors in such networks. Indeed, a user’s knowledge of which of his neighbors “liked” the product, changes his valuation for the product. Much of the work on the mechanis...

We study the behavior of firms in an imperfectly competitive environment in which firms influence the evolution of the stock of capital equipment. Our model enables us, using analytical characterizations, to show the effect of key ingredients of dynamic competition on firm strategies and industry dynamics in addition to the usual static interaction. These effects are the static market externali...