《外部性与公共物品》PPT课件.ppt
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1、Chapter 18Externalities and Externalities and Public GoodsPublic Goods1Chapter 1Topics to be DiscussednExternalitiesnWays of Correcting Market FailurenExternalities and Property RightsnCommon Property Resources2Chapter 1Topics to be DiscussednPublic GoodsnPrivate Preferences for Public Goods3Chapter
2、 1ExternalitiesnNegativelAction by one party imposes a cost on another partynPositivelAction by one party benefits another party4Chapter 1External CostnScenariolSteel plant dumping waste in a riverlThe entire steel market effluent can be reduced by lowering output(fixed proportions production functi
3、on)5Chapter 1External CostnScenariolMarginal External Cost(MEC)is the cost imposed on fishermen downstream for each level of production.lMarginal Social Cost(MSC)is MC plus MEC.6Chapter 1MCS=MCIDP1Aggregate social cost ofnegativeexternalityP1q1Q1MSCMSCIWhen there are negativeexternalities,the margin
4、alsocial cost MSC is higherthan the marginal cost.External CostsFirm outputPriceIndustry outputPriceMECMECIThe differences isthe marginal externalcost MEC.q*P*Q*The industry competitiveoutput is Q1 while the efficientlevel is Q*.The profit maximizing firmproduces at q1 while the efficient output lev
5、el is q*.7Chapter 1External CostnNegative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run.8Chapter 1ExternalitiesnPositive Externalities and InefficiencylExternalities can also result in too little production,as can be shown in an e
6、xample of home repair and landscaping.9Chapter 1MCP1External BenefitsRepair LevelValueDIs research and development discouraged by positiveexternalities?q1MSBMEBWhen there are positiveexternalities(the benefitsof repairs to neighbors),marginal social benefitsMSB are higher thanmarginal benefits D.q*P
7、*A self-interested home ownerinvests q1 in repairs.Theefficient level of repairsq*is higher.The higher priceP1 discourages repair.10Chapter 1Ways of Correcting Market FailurenAssumption:The market failure is pollutionlFixed-proportion production technologyuMust reduce output to reduce emissionsuUse
8、an output tax to reduce outputlInput substitution possible by altering technology11Chapter 1The Efficient Level of EmissionsLevel of Emissions246Dollarsper unitof Emissions02468101214161820222426MSCMCAE*The efficient level ofemissions is 12(E*)where MCA=MSC.Assume:1)Competitive market2)Output and em
9、issions decisions are independent3)Profit maximizing output chosenAt Eo the marginalcost of abating emissionsis greater than themarginal social cost.E0At E1 the marginalsocial cost is greaterthan the marginal benefit.E1Why is this more efficientthan zero emissions?12Chapter 1Ways of Correcting Marke
10、t FailurenOptions for Reducing Emissions to E*lEmission StandarduSet a legal limit on emissions at E*(12)uEnforced by monetary and criminal penaltiesuIncreases the cost of production and the threshold price to enter the industry13Chapter 1Standards and FeesLevel of EmissionsDollarsper unitof Emissio
11、nsMSCMCA312E*StandardFee14Chapter 1nOptions for Reducing Emissions to E*lEmissions FeeuCharge levied on each unit of emissionWays of Correcting Market Failure15Chapter 1TotalAbatement CostCost is less than thefee if emissions were not reduced.Total Feeof AbatementStandards and FeesLevel of Emissions
12、Dollarsper unitof EmissionsMSCMCA312E*Fee16Chapter 1nStandards Versus FeeslAssumptionsuPolicymakers have asymmetric informationuAdministrative costs require the same fee or standard for all firmsWays of Correcting Market Failure17Chapter 1Firm 2s ReducedAbatementCostsFirm 1s IncreasedAbatement Costs
13、MCA1MCA2The Case for FeesLevel of Emissions246Fee perUnit ofEmissions01234567891011121313514The cost minimizing solutionwould be an abatement of 6for firm 1 and 8 for firm 2 andMCA1=MCA2=$3.3.752.50The impact of a standard ofabatement of 7 for both firmsis illustrated.Not efficient becauseMCA2 MCA1.
14、If a fee of$3 was imposedFirm 1 emissions would fallby 6 to 8.Firm 2 emissionswould fall by 8 to 6.MCA1=MCA2:efficient solution.18Chapter 1nAdvantages of FeeslWhen equal standards must be used,fees achieve the same emission abatement at lower cost.lFees create an incentive to install equipment that
15、would reduce emissions further.Ways of Correcting Market Failure19Chapter 1ABC is the increasein social cost less thedecrease in abatementcost.MarginalSocialCostMarginal Costof AbatementThe Case for StandardsLevel of EmissionsFee perUnit ofEmissions0246810121416246810121416EBased on incompleteinform
16、ation standard is 9(12.5%decrease).ADE m*.32Chapter 1Refundable DepositsAmount of Glass$DPrice falls to P and the amount of recycled glass increases to M*.SvSrSThe supply of glass is the sum of the supplyof virgin glass(Sr)and the supply of recycledglass(Sr).M1PWithout refunds the price of glass is
17、P and Sr is M1.SrSPM*With refunds Sr increasesto Sr and S increases to S.33Chapter 1Externalities and Property RightsnProperty RightslLegal rules describing what people or firms may do with their propertylFor exampleuIf residents downstream owned the river(clean water)they control upstream emissions
18、.34Chapter 1nBargaining and Economic EfficiencylEconomic efficiency can be achieved without government intervention when the externality affects relatively few parties and when property rights are well specified.Externalities and Property Rights35Chapter 1Profits Under AlternativeEmissions Choices(D
19、aily)No filter,not treatment plant500100600Filter,no treatment plant300500800No filter,treatment plant500200700Filter,treatment plant300300600FactorysFishermensTotalProfitProfitProfit36Chapter 1nAssumptionslFactory pays for the filterlFishermen pay for the treatment plantnEfficient SolutionlBuy the
20、filter and do not build the plantExternalities and Property Rights37Chapter 1Bargaining with Alternative Property RightsNo CooperationProfit of factory$500$300Profit of fishermen$200$500CooperationProfit of factory$550$300Profit of fishermen$250$500Right to Dump Right to Clean Water38Chapter 1nConcl
21、usion:Coase TheoremlWhen parties can bargain without cost and to their mutual advantage,the resulting outcome will be efficient,regardless of how the property rights are specified.Externalities and Property Rights39Chapter 1nCostly Bargaining-The Role of Strategic BehaviorlBargaining requires clearl
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