air pollution is an example of a negative externality; it imposes harmful effects and costs on people other than polluters. in controlling air pollution, efficiency argument implies that, there is a rolefor the government to play. studies show that taxation of fuels can be a powerful indirect instrumentfor controlling air polluticn because of the association between fuels use and emissions. in ...

Consumers sometimes make choices that impose greater external costs on those who do not make the same choice. This paper examines how the selectivity of negative externalities in such situations affects the competitive equilibrium and the desirability of an externality-reducing public policy. Selective negative externalities create network externalities, but outcomes may differ greatly from typ...

I study a noncooperative multilateral bargaining game of coalition formation, based on underlying TU games in partition form, in which coalitions are allowed to renegotiate agreements. Special attention is devoted to the strategic considerations induced by the possibility of renegotiation and its consequences for the efficiency of bargaining. I deÞne a class of games, relative positive and rela...

The net effects of switching from consumption taxation to inflation taxation on resource allocation and welfare crucially depend on production externalities. With elastic labor supply, raising inflation taxation decreases leisure, but increases the levels of real consumption, capital, and output. Moreover, this tax switch has two opposing effects on the level of real money balances: A positive ...

This paper studies a risk-sharing model where traders face endowment shocks and information asymmetries. We show that a negative participation externality arises due to the endogenous information aggregation by prices, and it creates a counter force to a standard positive externality of risk-sharing. As a result, the optimal market size that maximizes gains from trade per trader is finite. The ...

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...

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...