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Externalities, monopoly and the objective function of the firm

  • David Kelsey

    ()

  • Frank Milne

This paper provides a theory of general equilibrium with externalities and/or monopoly. We assume that the firm's decisions are based on the preferences of shareholders and/or other stakeholders. Under these assumptions, a firmrm will produce fewer negative externalities than the comparable profit maximizing firm. In the absence of externalities, equilibrium with a monopoly will be Pareto efficient if the firm can price discriminate. The equilibrium can be implemented by a 2-part tariff.

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File URL: http://hdl.handle.net/10.1007/s00199-005-0036-8
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 29 (2006)
Issue (Month): 3 (November)
Pages: 565-589

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Handle: RePEc:spr:joecth:v:29:y:2006:i:3:p:565-589
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  1. Franklin Allen & Douglas Gale, 1999. "Corporate Governance and Competition," Center for Financial Institutions Working Papers 99-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
  2. Joseph Farrell, 1985. "Owner-Consumers and Efficiency," Working papers 380, Massachusetts Institute of Technology (MIT), Department of Economics.
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    • Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999. "Clubs and the Market," Econometrica, Econometric Society, vol. 67(5), pages 1185-1218, September.
  8. Milne, Frank & Shefrin, H. M., 1987. "Information and securities: A note on pareto dominance and the second best," Journal of Economic Theory, Elsevier, vol. 43(2), pages 314-328, December.
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  19. repec:cup:cbooks:9780521477185 is not listed on IDEAS
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