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Externalities, Monopoly and the Objective Function of the Firm


  • Frank Milne

    () (Queen's University)

  • David Kelsey

    () (Exeter University)


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.

Suggested Citation

  • Frank Milne & David Kelsey, 2005. "Externalities, Monopoly and the Objective Function of the Firm," Working Papers 1078, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1078

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    References listed on IDEAS

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    9. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
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    Cited by:

    1. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
    2. Camelia Bejan & Florin Bidian, 2012. "Ownership structure and efficiency in large economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(3), pages 571-602, August.
    3. David Kelsey & Frank Milne, 2010. "Takeovers and cooperatives: governance and stability in non-corporate firms," Journal of Economics, Springer, vol. 99(3), pages 193-209, April.
    4. Frank Milne & David Kelsey, 2006. "Takeovers and Cooperatives," Working Papers 1113, Queen's University, Department of Economics.

    More about this item


    Externality; general equilibrium; 2-part tariff; objective function of the firm;

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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