Since 1998 a lots of European Internet Service Providers (ISP) started to provide internet access freely. Why does a profit maximizing operator adopts this pricing policy? A consumer who wants to surf on the net needs to buy two services: the access from the ISP and the connection from the Telephone Operator. Since the two services are complements, the price of one service creates a negative ex...

We show that when a meaningful proportion of firms in an economy engage in tax avoidance strategies, the covariance between a firm’s cash flow and the market cash flows increases, thereby increasing a firm’s cost of capital. This negative externality is imposed on all firms in the economy, not just tax-avoiding firms. The negative externality results regardless of the level of uncertainty assoc...

Abstract Professional service firms in the built environment are subject to externalities. Whether these forces related economic downturns, changes regulatory environment, natural disasters, trade wars, armed conflict, mass migration, hyperinflation, climate change, global pandemics, entropy, or even never foreseen, must adapt, reposition, and rebound from negative events. The ability adapt is ...

We present a model with heterogeneous firms, in which credit constraints may give rise to self-fulfilling, sunspot-driven business cycle fluctuations. We derive optimal incentive-compatible loan contracts, under which a firm’s borrowing capacity is constrained by expected equity value. Interactions between debt and equity value made possible by credit constraints generate a credit externality, ...

This work proposes a non-stationary random field model to describe the spatial variability of housing prices that are affected by a localized externality. The model allows for the effect of the localized externality on house prices to be represented in the mean function and/or the covariance function of the random field. The correlation function of the proposed model is a mixture of an isotropi...

This paper studies optimal pay-as-you-go social security with positive bequests and endogenous fertility. With an investment externality, a competitive solution without social security suffers from under-investment in capital and over-reproduction of population. We show that social security can improve welfare by reducing fertility and increasing capital intensity. We also illustrate numericall...

We consider the case of a digital product with externality, where the product can be sold to multiple buyers who experience some disutility from other firms or consumers owning the same product. We model the problem of selling a digital product with externality as an auction and apply a Bayesian optimal mechanism design. We also design constant-approximation algorithms in the prior-free setting...

We analyze the contracting structure in a moral hazard setting with several agents where output is produced jointly and is the only contractible variable. Since the salary of each agent is a function of all agents efforts, a positive externality arises between them. This externality is not internalised by a centralised structure where the principal contracts directly with each agent. Instead, w...

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...