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Pricing Pollution and Other Negative Externalities


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  • Richard A. Tybout
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    Equilibrium conditions are described for pollution or "externalities of production" treated as substitute products. The results are contrasted with those based on traditionally assumed fixed proportions between product and waste outputs. The "neutrality of bribery or compensation" argument is refuted. With linear homogeneous production functions, compensation leads to exhaustion of product; bribery does not. Only certain selected production functions and conditions can lead to positive aggregate profits in a bribe-paying industry. Requirements are described. The analysis is applied to a number of related issues: the blackmail problem, third party pricing, and public goods aspects.

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    Article provided by The RAND Corporation in its journal Bell Journal of Economics.

    Volume (Year): 3 (1972)
    Issue (Month): 1 (Spring)
    Pages: 252-266

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    Handle: RePEc:rje:bellje:v:3:y:1972:i:spring:p:252-266

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    Cited by:
    1. Hennlock, Magnus, 2006. "Coasean Bargaining Games with Stochastic Stock Externalities," Working Papers in Economics 229, University of Gothenburg, Department of Economics.
    2. Kuechle, Graciela & Rios, Diego, 2012. "The Coase theorem reconsidered: The role of alternative activities," International Review of Law and Economics, Elsevier, vol. 32(1), pages 129-134.
    3. Biing-Shiunn Yang & Chao-Cheng Mai, 2013. "The impact of uncertain environmental regulatory policy on optimal plant location and anti-pollution technology selection," The Annals of Regional Science, Springer, vol. 50(3), pages 753-769, June.
    4. Luca Colombo & Gianluca Femminis & Alessandro Pavan, 2012. "Information Acquisition and Welfare," Discussion Papers 1554, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Aalbers, R.F.T., 1999. "On the Implications of Thresholds for Economic Science and Environmental Policy," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80016, Tilburg University.


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