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Externalities and Price Dynamics

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  • Datta, Manjira

Abstract

This paper analyzes dynamic movement of outputs and market clearing when mutually interdependent economies trade. The equilibrium evolution of stocks admit the possibility of monotonic or cyclical behavior, even in the long run. However, the prices eventually reach a steady state but may exhibit monotonic or oscillating behavior in the short run. Also, the author shows that higher consumption per unit of stock is associated with lower productivity or negative externalities. A stronger preference for the foreign good increases or decreases consumption, depending whether the externality is negative or positive. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Datta, Manjira, 1997. "Externalities and Price Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 587-603, August.
    • Handle: RePEc:ier:iecrev:v:38:y:1997:i:3:p:587-603
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    References listed on IDEAS

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    1. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    2. Datta, Manjira, 1997. "Externalities and Price Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 587-603, August.
    3. Tito Cordella & Manjira Datta, 2002. "Intertemporal Cournot and Walras Equilibria: An Illustration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 137-153, February.
    4. Datta, M. & Mirman, L., 1994. "Dynamic Capital Interactions, Externalities and Trade," CORE Discussion Papers 1994009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Fischer, Ronald D. & Mirman, Leonard J., 1992. "Strategic dynamic interaction : Fish wars," Journal of Economic Dynamics and Control, Elsevier, vol. 16(2), pages 267-287, April.
    6. Findlay, Ronald, 1980. "The Terms of Trade and Equilibrium Growth in the World Economy," American Economic Review, American Economic Association, vol. 70(3), pages 291-299, June.
    7. Fischer, Ronald D. & Mirman, Leonard J., 1996. "The Compleat Fish Wars: Biological and Dynamic Interactions," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 34-42, January.
    8. Wan, Henry Jr. & Majumdar, Mukul, 1980. "Trade under temporary equilibrium: Evolution in a loglinear world," Journal of International Economics, Elsevier, vol. 10(1), pages 37-62, February.
    9. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    10. P. K. Bardhan, 1965. "Optimum Accumulation and International Trade," Review of Economic Studies, Oxford University Press, vol. 32(3), pages 241-244.
    11. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
    12. Copeland, Brian R., 1990. "Strategic enhancement and destruction of fisheries and the environment in the presence of international externalities," Journal of Environmental Economics and Management, Elsevier, vol. 19(3), pages 213-226, November.
    13. Nishimura, Kazuo & Yano, Makoto, 1993. "Interlinkage in the Endogenous Real Business Cycles of International Economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 151-168, January.
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    Citations

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    Cited by:

    1. Datta, Manjira & Mirman, Leonard J, 2000. "Dynamic Externalities and Policy Coordination," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 44-59, February.
    2. Datta, Manjira & Mirman, Leonard J., 1999. "Externalities, Market Power, and Resource Extraction," Journal of Environmental Economics and Management, Elsevier, vol. 37(3), pages 233-255, May.
    3. Datta, Manjira, 2017. "Existence and uniqueness of equilibrium in a distorted dynamic small open economy," Economics Letters, Elsevier, vol. 152(C), pages 19-22.
    4. Manjira Datta, "undated". "Stationary Temporary Equilibrium in a General Model of Optimal Accumulation and Trade," Working Papers 97/8, Arizona State University, Department of Economics.
    5. Datta, Manjira, 1997. "Externalities and Price Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 587-603, August.
    6. Manjira Datta & Leonard Mirman & Olivier Morand & Kevin Reffett, "undated". "Lattice Methods in Computation of Sequential Markov Equilibrium in Dynamic Games," Working Papers 2179545, Department of Economics, W. P. Carey School of Business, Arizona State University.
    7. Akihiko Yanase, 2005. "Pollution Control in Open Economies: Implications of Within-period Interactions for Dynamic Game Equilibrium," Journal of Economics, Springer, vol. 84(3), pages 277-311, May.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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