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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 firm 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. Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R Zame, 2003. "Clubs and the Market," Levine's Working Paper Archive 618897000000000754, David K. Levine.
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  2. Renström, Thomas I & Yalcin, Erkan, 2002. "Endogenous Firm Objectives," CEPR Discussion Papers 3361, C.E.P.R. Discussion Papers.
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  17. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
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  19. Edward S. Prescott & Robert M. Townsend, 2000. "Firms as clubs in Walrasian markets with private information," Working Paper 00-08, Federal Reserve Bank of Richmond.
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