Existence and Efficiency of a Price-Taking Equilibrium in an Economy with Public Goods, Externalities and Property Rights: A Coasian Approach
We consider a general equilibrium economy with public goods and externalities. Following Boyd and Conley (1997), we treat externality markets directly instead of indirectly through Arrovian commodities. Because such direct externality markets are not subject to the nonconvexities that Starrett (1972) shows are fundamental to Arrow's externality markets, this new approach admits the use of largely standard methods to prove welfare and existence theorems in an economy with externalities. We extend the Boyd and Conley model to allow firms to benefit from public goods and be damaged by externalities, and to allow consumers to produce externalities. We state a first welfare theorem and prove the existence of a competitive equilibrium. Taken together, this can be viewed as a type of general equilibrium Coase Theorem. Considered as a special case, these theorems also represent a significant generalization of existing results for pure public goods economies.
|Date of creation:||Jan 2004|
|Date of revision:||Jan 2004|
|Contact details of provider:|| Web page: http://www.vanderbilt.edu/econ/wparchive/index.html|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roberts, Donald John, 1973.
"Existence of Lindahl equilibrium with a measure space of consumers,"
Journal of Economic Theory,
Elsevier, vol. 6(4), pages 355-381, August.
- Donald John Roberts, 1972. "Existence of Lindahl Equilibrium with a Measure Space of Consumers," Discussion Papers 1, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Luenberger David G., 1994. "Optimality and the Theory of Value," Journal of Economic Theory, Elsevier, vol. 63(2), pages 147-169, August.
- Gerard Debreu, 1961. "New Concepts and Techniques for Equilibrium Analysis," Cowles Foundation Discussion Papers 129, Cowles Foundation for Research in Economics, Yale University.
- V. V. Chari & Larry E. Jones, 1991.
"A reconsideration of the problem of social cost: free riders and monopolists,"
142, Federal Reserve Bank of Minneapolis.
- V.V. Chari & Larry E. Jones, 2000. "A reconsideration of the problem of social cost: Free riders and monopolists," Economic Theory, Springer, vol. 16(1), pages 1-22.
- D. K. Foley, 1967.
"Lindahl's Solution and the Core of an Economy with Public Goods,"
3, Massachusetts Institute of Technology (MIT), Department of Economics.
- Foley, Duncan K, 1970. "Lindahl's Solution and the Core of an Economy with Public Goods," Econometrica, Econometric Society, vol. 38(1), pages 66-72, January.
- Khan, M. Ali & Vohra, Rajiv, 1987. "On the existence of Lindahl-Hotelling equilibria," Journal of Public Economics, Elsevier, vol. 34(2), pages 143-158, November.
- Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
- Milleron, Jean-Claude, 1972. "Theory of value with public goods: A survey article," Journal of Economic Theory, Elsevier, vol. 5(3), pages 419-477, December.
- Aivazian, Varouj A & Callen, Jeffrey L & Lipnowski, Irwin, 1987. "The Coase Theorem and Coalitional Stability," Economica, London School of Economics and Political Science, vol. 54(216), pages 517-20, November.
- Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
- Diamantaras Dimitrios & Wilkie Simon, 1994. "A Generalization of Kaneko's Ratio Equilibrium for Economies with Private and Public Goods," Journal of Economic Theory, Elsevier, vol. 62(2), pages 499-512, April.
- Harrison, Glenn W & McKee, Michael, 1985. "Experimental Evaluation of the Coase Theorem," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 653-70, October.
- Osana, Hiroaki, 1973. "On the Boundedness of an Economy with Externalities," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 321-31, July.
- Bonnisseau, Jean-Marc, 1991. "Existence of Lindahl equilibria in economies with nonconvex production sets," Journal of Economic Theory, Elsevier, vol. 54(2), pages 409-416, August.
- Khan, M. Ali & Vohra, Rajiv, 1985. "On the existence of lindahl equilibria in economies with a measure space of non-transitive consumers," Journal of Economic Theory, Elsevier, vol. 36(2), pages 319-332, August.
- Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
- Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-22, June.
- Cres, Herve, 1996. "Symmetric Smooth Consumption Externalities," Journal of Economic Theory, Elsevier, vol. 69(2), pages 334-366, May.
- Hurwicz, Leonid, 1995. "What is the Coase Theorem?," Japan and the World Economy, Elsevier, vol. 7(1), pages 49-74, May.
- Boyd, John III & Conley, John P., 1997. "Fundamental Nonconvexities in Arrovian Markets and a Coasian Solution to the Problem of Externalities," Journal of Economic Theory, Elsevier, vol. 72(2), pages 388-407, February.
When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0403. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If references are entirely missing, you can add them using this form.