IDEAS home Printed from
   My bibliography  Save this article

Consumption Externalities and Economic Welfare


  • Randall G. Holcombe

    () (Department of Economics, Florida State University)

  • Russell S. Sobel

    (West Virginia University)


The distinction between technological and pecuniary externalities, usually made in production, can also be applied to consumption. Technological externalities create resource misallocations while pecuniary externalities do not. Taking a household production approach to consumption, this paper shows that many cases in which there are external effects on people's utility functions are pecuniary externalities, and public policy should ignore them. The economic literature has been inconsistent in its treatment of pecuniary consumption externalities, and this paper provides a framework for analysis in cases where the actions of some people affect the utility of others.

Suggested Citation

  • Randall G. Holcombe & Russell S. Sobel, 2000. "Consumption Externalities and Economic Welfare," Eastern Economic Journal, Eastern Economic Association, vol. 26(2), pages 157-170, Spring.
  • Handle: RePEc:eej:eeconj:v:26:y:2000:i:2:p:157-170

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. John S. Heywood, 1987. "Wage Discrimination and Market Structure," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(4), pages 617-628, July.
    2. Peoples, James H, Jr, 1994. "Monopolistic Market Structure, Unionization, and Racial Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 207-211, February.
    3. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-333, April.
    4. Walter Haessel & John Palmer, 1978. "Market Power and Employment Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 13(4), pages 545-560.
    5. Heywood, John S & Peoples, James H, Jr, 1994. "Deregulation and the Prevalence of Black Truck Drivers," Journal of Law and Economics, University of Chicago Press, vol. 37(1), pages 133-155, April.
    6. Barry T. Hirsch, 1988. "Trucking Regulation, Unionization, and Labor Earnings: 1973-85," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 296-319.
    7. Orley Ashenfelter & Timothy Hannan, 1986. "Sex Discrimination and Product Market Competition: The Case of the Banking Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 149-173.
    8. James Peoples & Lisa Saunders, 1993. "Trucking Deregulation and the Black/White Wage Gap," ILR Review, Cornell University, ILR School, vol. 47(1), pages 23-35, October.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Stefan Mann, 2006. "Merit goods in a utilitarian framework," Review of Political Economy, Taylor & Francis Journals, vol. 18(4), pages 509-520.
    2. Mann, Stefan & Wustemann, Henry, 2008. "Multifunctionality and a new focus on externalities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 293-307, February.

    More about this item


    Consumption; Economic Welfare; Externalities; Welfare;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D10 - Microeconomics - - Household Behavior - - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:26:y:2000:i:2:p:157-170. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson, College of the Holy Cross). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.