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 a social network, agents are intelligent and have the capability to make decisions to maximize their utilities. They can either make wise decisions by taking advantages of other agents’ experiences through learning, or make decisions earlier to avoid competitions from huge crowds. Both these two effects, social learning and negative network externality, play important roles in the decision p...

We study a system where a service is shared by many identical customers; the service is provided by a single resource. As expected each customer experiences congestion, a negative externality, from the others’ usage of the shared resource in our model. In addition, we assume each customer experiences a positive externality from others’ usage; this is in contrast to prior literature that assumes...

We study to what extent collusive behavior is affected by the awareness of negative externalities. Theories outcome-based social preferences suggest that externalities make collusion harder sustain than predicted standard economic theory, while sociological theories ties and intergroup comparisons bilateral cooperation can be strengthened if there exist outsiders gain from cooperative break dow...

We analyze the conduct of fiscal policy in a financially integrated union presence financial frictions. Frictions create wedge between return to investment and interest rate. This leads an over-spending externality. While social cost spending is investment, governments care mostly about (depressed) rate they face. In other words, crowding-out effects public are partly “exported” rest union. arg...

This paper proposes a class of literacy measures that takes into account the externality generated by the presence of literates in the household. It is claimed that such externality is increasing in the number of literates in the household, has characteristics of rivalry in consumption, and therefore is a function of the distribution of literates and illiterates in the household. The measure is...