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Externalities and Price Dynamics

Author

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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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    Cited by:

    1. 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.
    2. Datta, Manjira, 2017. "Existence and uniqueness of equilibrium in a distorted dynamic small open economy," Economics Letters, Elsevier, vol. 152(C), pages 19-22.
    3. Manjira Datta, "undated". "Stationary Temporary Equilibrium in a General Model of Optimal Accumulation and Trade," Working Papers 2132839, Department of Economics, W. P. Carey School of Business, Arizona State University.
    4. Manjira Datta & Leonard J. Mirman, 2000. "Dynamic Externalities and Policy Coordination," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 44-59, February.
    5. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 2003. "International aspects of public infrastructure investment," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 884-910, November.
    6. 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.
    7. 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.

    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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