Fiscal externalities across jurisdictions can arise from imperfect tax enforcement and the avoidance behavior of taxpayers. Base shifting to low tax jurisdictions tends to generate positive fiscal externalities, while understating the overall tax liability leads to negative fiscal externalities when the tax base is apportioned across jurisdictions. While much of the literature has focused on ba...

Under review for publication in the Journal of Urban Economics, September 2014 ABSTRACT: This paper develops a spatial general equilibrium model that accommodates both congestion and agglomeration externalities, while firms’ and households’ land-use decisions are endogenous across continuous space. Focusing on the interaction between externalities and land use patterns, we examine the efficienc...

In this paper, we study games with externalities. In the presence of externalities, the worth of a coalition depends on the coalition itself and a partition of the player set. In the presence of externalities, superadditivity is no longer sufficient for the efficiency of the grand coalition: some partitions may yield more surplus than the grand coalition. This result was indicated by Hafalir (G...

Taylor Guitars purchased an ebony mill in Cameroon to ensure corporate social and environmental responsibility (CSER) in sourcing, and shared the responsibly-sourced supply of ebony with competitors through horizontal sourcing. Inspired by this case, we investigate vertical integration as an alternative strategy for CSER in sourcing in which a firm can vertically integrate with its supplier in ...

Federal constitutions are viewed as incomplete contracts that must be renegotiated among self-interested, reelection-seeking politicians. Even when collectively sub-optimal, they are difficult to renegotiate if each state government faces electoral incentives to ignore externalities and federation-wide collective goods. Vertically integrated political parties help resolve this problem by creati...

Law enforcement is decentralized. It is so despite documented interjurisdictional externalities which would justify its centralization. To explain this fact, we construct a political economy model of law enforcement. Under decentralization, law enforcement in each region is in accord with the preferences of regional citizens, but interjurisdictional externalities are neglected. Under centraliza...

In collective decision making bilateral deals can increase or decrease the likelihood of finding compromises, depending on whether such deals have externalities. Positive externalities mean third actors profit from bilateral deals, whereas negative externalities mean bilateral deals hurt third actors. We develop the first model of collective decision making that takes externalities into account...

This paper studies bargaining between a seller and multiple buyers with externalities. A full characterization of the stationary subgame perfect equilibria in generic games is presented. Equilibria exist for generic parameter values, with delay only for strong positive externalities. The outcome is efficient if externalities are not too positive. Increasing the bargaining power of the seller de...