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Pecuniary & Market Mediated Externalities: Towards a General Theory of the Welfare Economics & Economies with Imperfect Information & Incomplete Mrkts

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  • Bruce C. Greenwald
  • Joseph E. Stiglitz

Abstract

This paper presents a simple but quite general framework for analyzing the impact of informational externalities. By identifying the traditional pecuniary effect of these externalities which nets out,the paper greatly simplifies the problem of determining when tax interventions can be Pareto improving. In some cases it also leads to simple tests, based on readily observable indicators of the efficacy of a particular tax policy. The framework of the paper is used to analyze adverse selection, signalling, moral hazard, incomplete contingent claim markets and queue rationing equilibria.

Suggested Citation

  • Bruce C. Greenwald & Joseph E. Stiglitz, 1984. "Pecuniary & Market Mediated Externalities: Towards a General Theory of the Welfare Economics & Economies with Imperfect Information & Incomplete Mrkts," NBER Working Papers 1304, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1304 Note: PE
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    1. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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    Cited by:

    1. John Geanakoplos & Martin Shubik, 1989. "The Capital Asset Pricing Model as a General Equilibrium with Incomplete Markets," Cowles Foundation Discussion Papers 913, Cowles Foundation for Research in Economics, Yale University.
    2. repec:sbe:breart:v:5:y:1985:i:1:a:3129 is not listed on IDEAS
    3. Stiglitz, J.E., 1985. "Economics of information and the theory of economic development," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 5(1), April.

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