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On Positive Externality

Author

Listed:
  • Vorotnikova, Ekaterina
  • Schmitz, Andrew

Abstract

This paper fills the gap of modeling positive externality cases when private marginal cost is higher than social marginal cost. Within this unique type of divergence of marginal costs two cases are scrutinized: social marginal benefit being higher than private marginal benefit, and vice versa, social marginal benefit being lower than private marginal benefit. Empirical case in study is commercial shellfish farming firm on the West Coast. The study shows that contrary to popular beliefs correcting for positive externalities does not always result in a positive welfare; however, it does result in a positive welfare for the study case of the particular shellfish farm.

Suggested Citation

  • Vorotnikova, Ekaterina & Schmitz, Andrew, 2013. "On Positive Externality," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150462, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:150462
    DOI: 10.22004/ag.econ.150462
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    References listed on IDEAS

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    1. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(4), pages 582-606.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, January.
    4. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
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