Chapter Eighteen. Externalities, Open Access, and Public Goods

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Chapter Eighteen. Externalities, Open Access, and Public Goods

Содержание

2. © 2007 Pearson Addison-Wesley. All rights reserved. Externalities, Open Access, and Public Goods In this chapter,
3. © 2007 Pearson Addison-Wesley. All rights reserved. Externalities Externality The direct effect of the actions of
4. © 2007 Pearson Addison-Wesley. All rights reserved. Externalities Externalities may either help or harm others. An
5. © 2007 Pearson Addison-Wesley. All rights reserved. The inefficiency of competition with externalities Competitive firms and
6. © 2007 Pearson Addison-Wesley. All rights reserved. The inefficiency of competition with externalities Private cost The
7. © 2007 Pearson Addison-Wesley. All rights reserved. Supply-and-Demand Analysis We use a supply-and-demand diagram to illustrate
8. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.1 Welfare Effects of Pollution in a Competitive
9. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.1 Welfare Effects of Pollution in a Competitive
10. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.1 Welfare Effects of Pollution in a Competitive
11. © 2007 Pearson Addison-Wesley. All rights reserved. Supply-and-Demand Analysis The figure illustrates two main results with
12. © 2007 Pearson Addison-Wesley. All rights reserved. Reducing Externalities Because competitive markets produce too many negative
13. © 2007 Pearson Addison-Wesley. All rights reserved. Table 18.1 Industrial CO2 Emissions, 2002
14. © 2007 Pearson Addison-Wesley. All rights reserved. Reducing Externalities If a government has sufficient knowledge about
15. © 2007 Pearson Addison-Wesley. All rights reserved. Reducing Externalities A governmental limit on the amount of
16. © 2007 Pearson Addison-Wesley. All rights reserved. Reducing Externalities Internalize the externality To bear the cost
17. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.2 Taxes to Control Pollution Placing a tax
18. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.2 Taxes to Control Pollution Alternatively, applying a
19. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.2 Taxes to Control Pollution Demand MC p
20. © 2007 Pearson Addison-Wesley. All rights reserved. Cost-Benefit Analysis By using a cost-benefit analysis, we obtain
21. © 2007 Pearson Addison-Wesley. All rights reserved. Cost-Benefit Analysis Welfare is maximized by reducing output and
22. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.3 Cost-Benefit Analysis of Pollution The benefit curve
23. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.3 Cost-Benefit Analysis of Pollution The net benefit
24. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.3 Cost-Benefit Analysis of Pollution Cost: less paper
25. © 2007 Pearson Addison-Wesley. All rights reserved. Market Structure and Externalities Two of our main results
26. © 2007 Pearson Addison-Wesley. All rights reserved. Monopoly and Externalities Although the competitive market with an
27. © 2007 Pearson Addison-Wesley. All rights reserved. Monopoly and Externalities Which effect dominates depends on the
28. © 2007 Pearson Addison-Wesley. All rights reserved. Monopoly Versus Competitive Welfare with Externalities In the absence
29. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.4 Monopoly, Competition, and Social Optimum with Pollution
30. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.4 Monopoly, Competition, and Social Optimum with Pollution
31. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.4 Monopoly, Competition, and Social Optimum with Pollution
32. © 2007 Pearson Addison-Wesley. All rights reserved. Taxing Externalities in Noncompetitive Markets Trying to solve a
33. © 2007 Pearson Addison-Wesley. All rights reserved. Taxing Externalities in Noncompetitive Markets To achieve a social
34. © 2007 Pearson Addison-Wesley. All rights reserved. Allocating Property Rights to Reduce Externalities Instead of controlling
35. © 2007 Pearson Addison-Wesley. All rights reserved. Allocating Property Rights to Reduce Externalities If no one
36. © 2007 Pearson Addison-Wesley. All rights reserved. Allocating Property Rights to Reduce Externalities For many bads,
37. © 2007 Pearson Addison-Wesley. All rights reserved. Coase Theorem According to the Coase Theorem (Coase, 1960),
38. © 2007 Pearson Addison-Wesley. All rights reserved. Table 18.2 (a,b) Property Rights and Bargaining
39. © 2007 Pearson Addison-Wesley. All rights reserved. Table 18.2 (c) Property Rights and Bargaining
40. © 2007 Pearson Addison-Wesley. All rights reserved. Coase Theorem If there are no impediments to bargaining,
41. © 2007 Pearson Addison-Wesley. All rights reserved. Coase Theorem Who gets the property rights affects the
42. © 2007 Pearson Addison-Wesley. All rights reserved. Problems with the Coase Approach First, if transaction costs
43. © 2007 Pearson Addison-Wesley. All rights reserved. Markets for Pollution If high transaction costs preclude bargaining,
44. © 2007 Pearson Addison-Wesley. All rights reserved. Markets for Pollution Under this cap and trade system,
45. © 2007 Pearson Addison-Wesley. All rights reserved. Markets for Pollution Bu using a market, the government
46. © 2007 Pearson Addison-Wesley. All rights reserved. Open-Access Common Property Open-Access Common Property Resources to which
47. © 2007 Pearson Addison-Wesley. All rights reserved. Overuse of Open-Access Common Property Because people do not
48. © 2007 Pearson Addison-Wesley. All rights reserved. Solving the Commons Problem Government Regulation of Commons Overuse
49. © 2007 Pearson Addison-Wesley. All rights reserved. Solving the Commons Problem Government Regulation of Commons Alternatively,
50. © 2007 Pearson Addison-Wesley. All rights reserved. Solving the Commons Problem Assigning Property Rights An alternative
51. © 2007 Pearson Addison-Wesley. All rights reserved. Public Goods Public Good A commodity or service whose
52. © 2007 Pearson Addison-Wesley. All rights reserved. Table 18.3 Rivalry and Exclusion Types of Goods
53. © 2007 Pearson Addison-Wesley. All rights reserved. Markets for public goods exist only if nonpurchasers can
54. © 2007 Pearson Addison-Wesley. All rights reserved. Demand for Public Goods Because a public good lacks
55. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.5 Inadequate Provision of a Public Good Security
56. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.5 Inadequate Provision of a Public Good Thus
57. © 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.5 Inadequate Provision of a Public Good Guards
58. © 2007 Pearson Addison-Wesley. All rights reserved. Free Riding Many people are unwilling to pay for
59. © 2007 Pearson Addison-Wesley. All rights reserved. Table 18.4 Private Payments for a Public Good
60. © 2007 Pearson Addison-Wesley. All rights reserved. Free Riding In each of these games, the Nash
61. © 2007 Pearson Addison-Wesley. All rights reserved. Reducing Free Riding Governmental or other collective actions can
62. © 2007 Pearson Addison-Wesley. All rights reserved. Valuing Public Goods To ensure that a nonexclusive public
63. © 2007 Pearson Addison-Wesley. All rights reserved. Table 18.5 Voting on $300 Traffic Signals
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© 2007 Pearson Addison-Wesley. All rights reserved.
Externalities, Open Access, and

Public Goods

In this chapter, we examine six main topics
Externalities
The inefficiency of competition with externalities
Market structure and externalities
Allocating property rights to reduce externalities
Open-access common property
Public goods

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© 2007 Pearson Addison-Wesley. All rights reserved.
Externalities
Externality
The direct effect of

the actions of a person or firm on another person’s well-being or a firm’s production capability rather than an indirect effect through changes in prices.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Externalities
Externalities may either help

or harm others.
An externality that harms someone is called a negative externality.
A positive externality benefits others.

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© 2007 Pearson Addison-Wesley. All rights reserved.
The inefficiency of competition

with externalities

Competitive firms and consumers do not have to pay for the harms of their negative externalities, so they create excessive amounts.
Because producers are not compensated for the benefits of a positive externality, too little of such externalities is produced.

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© 2007 Pearson Addison-Wesley. All rights reserved.
The inefficiency of competition

with externalities

Private cost
The cost of production only, not including externalities
Social cost
The private cost plus the cost of the harms from externalities

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© 2007 Pearson Addison-Wesley. All rights reserved.
Supply-and-Demand Analysis
We use a

supply-and-demand diagram to illustrate that a competitive market produces excessive pollution because the firms’ private cost is less than their social cost.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.1 Welfare Effects

of Pollution in a Competitive Market

The competitive equilibrium, , is determined by the intersection of the demand curve and the competitive supply or private marginal cost curve, , which ignores the cost of pollution.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.1 Welfare Effects

of Pollution in a Competitive Market

The social optimum, , is at the intersection of the demand curve and the social marginal cost curve,
, where is the marginal cost of the pollution (gunk). Private producer surplus is based on curve, and social producer surplus is based on the curve.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.1 Welfare Effects

of Pollution in a Competitive Market

Demand

450

= 282

= 240

198

105

225

, Tons of paper per day

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© 2007 Pearson Addison-Wesley. All rights reserved.
Supply-and-Demand Analysis
The figure illustrates

two main results with respect to negative externalities.
First, a competitive market produces excessive negative externalities.
Second, the optimal amount of pollution is greater than zero.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Reducing Externalities
Because competitive markets

produce too many negative externalities, government intervention may provide a social gain.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Table 18.1 Industrial CO2

Emissions, 2002

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© 2007 Pearson Addison-Wesley. All rights reserved.
Reducing Externalities
If a government

has sufficient knowledge about pollution damage, the demand curve, costs, and the production technology, it can force a competitive market to produce the social optimum.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Reducing Externalities
A governmental limit

on the amount of air or water pollution that may be released is called an emission standard. A tax on air pollution is called an emissions fee, and a tax on discharges into the air or waterways is an effluent charge.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Reducing Externalities
Internalize the externality
To

bear the cost of the harm that one inflicts on others (or to capture the benefit that one provides to others)

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.2 Taxes to

Control Pollution

Placing a tax on the firms equal to the harm the gunk, , causes them to internalize the externality, so their private marginal cost is the same as the social marginal cost, . As a result, the competitive after-tax equilibrium is the same as the social optimum, .

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.2 Taxes to

Control Pollution

Alternatively, applying a specific tax of
per ton of paper, which is the marginal harm from the gunk at , also results in the social optimum.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.2 Taxes to

Control Pollution

Demand

(

)

450

= 282

= 198

= 84

225

, Tons of paper per day

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© 2007 Pearson Addison-Wesley. All rights reserved.
Cost-Benefit Analysis
By using a

cost-benefit analysis, we obtain another interpretation of the pollution problem in terms of the marginal cost and benefit of the pollution itself.

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Cost-Benefit Analysis
Welfare is maximized

by reducing output and pollution until the marginal benefit from less pollution equals the marginal cost of less output.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.3 Cost-Benefit Analysis

of Pollution

The benefit curve reflects the reduction in harm from pollution as the amount of gunk falls from the competitive level. The cost of reducing the amount of gunk is the fall in output, which reduces consumer surplus and private producer surplus. Welfare is maximized at 84 tons of paper and 84 units of gunk, the quantities at which the difference between the benefit and cost curves, the net benefit, is greatest.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.3 Cost-Benefit Analysis

of Pollution

The net benefit is maximized where the marginal benefit, , which is the slope of the benefit curve, equals the marginal cost, , the slope of the cost curve.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.3 Cost-Benefit Analysis

of Pollution

Cost: less paper

Benefit: less gunk

Maximum

net

benefit

105

, Units of gunk per day

, Tons of paper per day

, Units of gunk per day

, Tons of paper per day

(a) Cost and Benefit

(b) Marginal Cost and Marginal Benefit

4,000

2,000

105

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© 2007 Pearson Addison-Wesley. All rights reserved.
Market Structure and Externalities
Two

of our main results concerning competitive markets and negative externalities—that too much pollution is produced and that a tax equal to the marginal social cost of the externality solves the problem—do not hold for other market structures.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Monopoly and Externalities
Although the

competitive market with an externality always produces more output than the social optimum, a monopoly may produce more than, the same as, or less than the social optimum.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Monopoly and Externalities
Which effect

dominates depends on the elasticity of demand for the output and on the extent of the marginal damage the pollution causes.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Monopoly Versus Competitive Welfare

with Externalities

In the absence of externalities, welfare is greater under competition than under an unregulated monopoly.
However, with an externality, welfare may be greater with monopoly than with competition.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.4 Monopoly, Competition,

and Social Optimum with Pollution

At the competitive equilibrium, , more is produced than at the social optimum, . As a result, the deadweight loss in the competitive market is . The monopoly equilibrium, , is determined by the intersection of the marginal revenue and the private marginal cost, , curves.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.4 Monopoly, Competition,

and Social Optimum with Pollution

The social welfare (based on the marginal social cost, , curve) under monopoly is . Here the deadweight loss of monopoly, , is less than the deadweight loss under competition, .

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© 2007 Pearson Addison-Wesley. All rights reserved.
Figure 18.4 Monopoly, Competition,

and Social Optimum with Pollution

, Tons of paper per day

Demand

450

330

310

282

240

105

225

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© 2007 Pearson Addison-Wesley. All rights reserved.
Taxing Externalities in Noncompetitive

Markets

Trying to solve a negative externality problem is more complex in a noncompetitive market than in a competitive market.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Taxing Externalities in Noncompetitive

Markets

To achieve a social optimum in a competitive market, the government only has to reduce the externality, possibly by decreasing output.
In a noncompetitive market, the government must eliminate problems arising from both externalities and the exercise of market power.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Allocating Property Rights to

Reduce Externalities

Instead of controlling externalities directly through emissions fees and emissions standards, the government may take an indirect approach by assigning a property right: an exclusive privilege to use an asset.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Allocating Property Rights to

Reduce Externalities

If no one holds a property right for a good or a bad, the good or bad is unlikely to have a price.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Allocating Property Rights to

Reduce Externalities

For many bads, such as pollution, and for some goods, property rights are not clearly defined. No one has exclusive property rights to the sir we breathe. Because of this lack of a price, a polluter’s private marginal cost of production is less than the full social marginal cost.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Coase Theorem
According to the

Coase Theorem (Coase, 1960), the optimal levels of pollution and output can result from bargaining between polluters and their victims if property rights are clearly defined.

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© 2007 Pearson Addison-Wesley. All rights reserved.
Table 18.2 (a,b) Property

Rights and Bargaining

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© 2007 Pearson Addison-Wesley. All rights reserved.
Table 18.2 (c) Property

Rights and Bargaining

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© 2007 Pearson Addison-Wesley. All rights reserved.
Coase Theorem
If there are

no impediments to bargaining, assigning property rights results in the efficient outcome at which joint profits are maximized.
Efficiency is achieved regardless of who receives the property rights.

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property rights affects the income distribution. The property rights are valuable. The party with the property rights may be compensated by the other party.

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Approach

First, if transaction costs are very high, it might not pay for the two sides to meet.
Second, if firms engage in strategic bargaining behavior, an agreement may not be reached.
Third, if either side lacks information about the costs or benefits or reducing pollution, a nonefficient outcome may occur.

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transaction costs preclude bargaining, we may be able to overcome this problem by using a market, which facilitates exchanges between individuals.

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cap and trade system, the government gives firms permits, each of which confers the right to create a certain amount of pollution. Each firm may use its permits or sell them to other firms.

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a market, the government does not have to collect this type of detailed information to achieve efficiency. Its only decision concerns what total amount of pollution to allow.

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Property
Resources to which everyone has free access

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Property

Because people do not have to pay to use open-access common property resources, they are overused.
e.g.

Common Pools.
The Internet.
Roads
Fisheries.

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Regulation of Commons
Overuse of a common resource occurs because individuals do not bear the full social cost. However, by applying a tax or fee equal to the externality harm that each individual imposes on others, a government forces each person to internalize the externality.

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Regulation of Commons
Alternatively, the government can restrict access to the commons. One typical approach is to grant access on a first-come, first-served basis.

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Property Rights
An alternative approach to resolving the commons problem is to assign private property rights.

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or service whose consumption by one person does not preclude others from also consuming it

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Exclusion

Types of Goods

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exist only if nonpurchasers can be excluded from consuming them.
Markets do not exist for nonexclusive public goods.
If the government does not provide a nonexclusive public good, no one provides it.

Markets for Public Goods

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a public good lacks rivalry, many people can get pleasure from the same unit of output. As a consequence, the social demand curve or willingness-to-pay curve for a public good is the vertical sum of the demand curves of each individual.

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of a Public Good

Security guards protect both tenants of the mall. If each guard costs $10 per hour, the television store, with demand , is willing to hire four guards per hour. The ice-cream parlor, with demand , is not willing to hire any guards.

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of a Public Good

Thus if everyone acts independently, the equilibrium is . The social demand for this public good is the vertical sum of the individual demand curves, . Thus the social optimum is , at which five guards are hired.

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of a Public Good

Guards per hour

Supply,

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unwilling to pay for their share of a public good. They try to get others to pay for it, so they can free ride: benefit from the actions of others without paying.

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for a Public Good

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these games, the Nash equilibrium is for neither store to hire a guard because of free riding. The nonoptimal outcome occurs for the same reason as in other prisoners’ dilemma games: The stores don’t do what is best for them collectively when they act independently.

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other collective actions can reduce free riding.
Methods that may be used include social pressure, merges, compulsion, and privatization.

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that a nonexclusive public good is provided, a government usually produces it or compels others to do so. Issues that a government faces in providing such a public good include whether to provide it at all and, if so, how much to provide.

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$300 Traffic Signals

Chapter Eighteen. Externalities, Open Access, and Public Goods

Содержание

© 2007 Pearson Addison-Wesley. All rights reserved. Externalities, Open Access, and

© 2007 Pearson Addison-Wesley. All rights reserved. ExternalitiesExternalityThe direct effect of

© 2007 Pearson Addison-Wesley. All rights reserved. ExternalitiesExternalities may either help

© 2007 Pearson Addison-Wesley. All rights reserved. The inefficiency of competition

© 2007 Pearson Addison-Wesley. All rights reserved. The inefficiency of competition

© 2007 Pearson Addison-Wesley. All rights reserved. Supply-and-Demand AnalysisWe use a

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.1 Welfare Effects

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.1 Welfare Effects

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.1 Welfare Effects

© 2007 Pearson Addison-Wesley. All rights reserved. Supply-and-Demand AnalysisThe figure illustrates

© 2007 Pearson Addison-Wesley. All rights reserved. Reducing ExternalitiesBecause competitive markets

© 2007 Pearson Addison-Wesley. All rights reserved. Table 18.1 Industrial CO2

© 2007 Pearson Addison-Wesley. All rights reserved. Reducing ExternalitiesIf a government

© 2007 Pearson Addison-Wesley. All rights reserved. Reducing ExternalitiesA governmental limit

© 2007 Pearson Addison-Wesley. All rights reserved. Reducing ExternalitiesInternalize the externalityTo

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.2 Taxes to

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.2 Taxes to

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.2 Taxes to

© 2007 Pearson Addison-Wesley. All rights reserved. Cost-Benefit AnalysisBy using a

© 2007 Pearson Addison-Wesley. All rights reserved. Cost-Benefit AnalysisWelfare is maximized

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.3 Cost-Benefit Analysis

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.3 Cost-Benefit Analysis

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.3 Cost-Benefit Analysis

© 2007 Pearson Addison-Wesley. All rights reserved. Market Structure and ExternalitiesTwo

© 2007 Pearson Addison-Wesley. All rights reserved. Monopoly and ExternalitiesAlthough the

© 2007 Pearson Addison-Wesley. All rights reserved. Monopoly and ExternalitiesWhich effect

© 2007 Pearson Addison-Wesley. All rights reserved. Monopoly Versus Competitive Welfare

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.4 Monopoly, Competition,

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.4 Monopoly, Competition,

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.4 Monopoly, Competition,

© 2007 Pearson Addison-Wesley. All rights reserved. Taxing Externalities in Noncompetitive

© 2007 Pearson Addison-Wesley. All rights reserved. Taxing Externalities in Noncompetitive

© 2007 Pearson Addison-Wesley. All rights reserved. Allocating Property Rights to

© 2007 Pearson Addison-Wesley. All rights reserved. Allocating Property Rights to

© 2007 Pearson Addison-Wesley. All rights reserved. Allocating Property Rights to

© 2007 Pearson Addison-Wesley. All rights reserved. Coase TheoremAccording to the

© 2007 Pearson Addison-Wesley. All rights reserved. Table 18.2 (a,b) Property

© 2007 Pearson Addison-Wesley. All rights reserved. Table 18.2 (c) Property

© 2007 Pearson Addison-Wesley. All rights reserved. Coase TheoremIf there are

© 2007 Pearson Addison-Wesley. All rights reserved. Coase TheoremWho gets the

© 2007 Pearson Addison-Wesley. All rights reserved. Problems with the Coase

© 2007 Pearson Addison-Wesley. All rights reserved. Markets for PollutionIf high

© 2007 Pearson Addison-Wesley. All rights reserved. Markets for PollutionUnder this

© 2007 Pearson Addison-Wesley. All rights reserved. Markets for PollutionBu using

© 2007 Pearson Addison-Wesley. All rights reserved. Open-Access Common PropertyOpen-Access Common

© 2007 Pearson Addison-Wesley. All rights reserved. Overuse of Open-Access Common

© 2007 Pearson Addison-Wesley. All rights reserved. Solving the Commons ProblemGovernment

© 2007 Pearson Addison-Wesley. All rights reserved. Solving the Commons ProblemGovernment

© 2007 Pearson Addison-Wesley. All rights reserved. Solving the Commons ProblemAssigning

© 2007 Pearson Addison-Wesley. All rights reserved. Public GoodsPublic GoodA commodity

© 2007 Pearson Addison-Wesley. All rights reserved. Table 18.3 Rivalry and

© 2007 Pearson Addison-Wesley. All rights reserved. Markets for public goods

© 2007 Pearson Addison-Wesley. All rights reserved. Demand for Public GoodsBecause

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.5 Inadequate Provision

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.5 Inadequate Provision

© 2007 Pearson Addison-Wesley. All rights reserved. Figure 18.5 Inadequate Provision

© 2007 Pearson Addison-Wesley. All rights reserved. Free RidingMany people are

© 2007 Pearson Addison-Wesley. All rights reserved. Table 18.4 Private Payments

© 2007 Pearson Addison-Wesley. All rights reserved. Free RidingIn each of

© 2007 Pearson Addison-Wesley. All rights reserved. Reducing Free RidingGovernmental or

© 2007 Pearson Addison-Wesley. All rights reserved. Valuing Public GoodsTo ensure

© 2007 Pearson Addison-Wesley. All rights reserved. Table 18.5 Voting on

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Figure 18.4 Monopoly, Competition,

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Figure 18.4 Monopoly, Competition,

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Figure 18.4 Monopoly, Competition,

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Taxing Externalities in Noncompetitive

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Taxing Externalities in Noncompetitive

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Allocating Property Rights to

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Allocating Property Rights to

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Allocating Property Rights to

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Coase Theorem
According to the

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Table 18.2 (a,b) Property

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Table 18.2 (c) Property

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Coase Theorem
If there are

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Coase Theorem
Who gets the

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Problems with the Coase

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Markets for Pollution
If high

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Markets for Pollution
Under this

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Markets for Pollution
Bu using

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Open-Access Common Property
Open-Access Common

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Overuse of Open-Access Common

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Solving the Commons Problem
Government

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Solving the Commons Problem
Government

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Solving the Commons Problem
Assigning

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Public Goods
Public Good
A commodity

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Table 18.3 Rivalry and

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Markets for public goods

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Demand for Public Goods
Because

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Figure 18.5 Inadequate Provision

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Figure 18.5 Inadequate Provision

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Figure 18.5 Inadequate Provision

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Free Riding
Many people are

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Table 18.4 Private Payments

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Free Riding
In each of

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Reducing Free Riding
Governmental or

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Valuing Public Goods
To ensure

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Table 18.5 Voting on