中级微观经济学范里安课件.ppt

ChapterThirty Three Externalities Externalities Anexternalityisacostorabenefitimposeduponaconsumerorafirmbyactionstakenbyothers Thecostorbenefitisthusgeneratedexternallytotheconsumerorthefirm Anexternallyimposedbenefitisapositiveexternality Anexternallyimposedcostisanegativeexternality ExamplesofNegativeExternalities Airpollution Waterpollution Loudpartiesnextdoor Trafficcongestion Second handcigarettesmokesufferedbyanon smoker Increasedhealthinsurancepremiaduetoalcoholortobaccoconsumption ExamplesofPositiveExternalities Awell maintainedpropertynextdoorthatraisesthemarketvalueofyourownproperty Apleasantcologneorscentwornbythepersonseatednexttoyou Improveddrivinghabitsthatreduceaccidentrisks Ascientificadvance ExternalitiesandEfficiency Thecrucialfeatureofanexternalityisthatitimpactsathirdparty thatis somebodywhoisnotdirectlyaparticipantintheactivitywhichproducestheexternalcostorbenefit ExternalitiesandEfficiency ExternalitiescauseParetoinefficiency typicallytoomuchscarceresourceisallocatedtoanactivitywhichcausesanegativeexternalitytoolittleresourceisallocatedtoanactivitywhichcausesapositiveexternality ExternalitiesandPropertyRights Anexternalitywillbetakentobeapurelypubliccommodity Acommodityispurelypublicifitisconsumedbyeveryone nonexcludability andeverybodyconsumestheentireamountofthecommodity nonrivalryinconsumption E g abroadcasttelevisionprogram Inefficiency NegativeExternalities Consideranexampleoftwoagents AandB andtwocommodities moneyandsmoke BothsmokeandmoneyaregoodsforAgentA MoneyisagoodandsmokeisabadforAgentB Smokeisapurelypubliccommodity Inefficiency NegativeExternalities AgentAisendowedwith yA AgentBisendowedwith yB Smokeintensityismeasuredonascalefrom0 nosmoke to1 maximumconcentration Inefficiency NegativeExternalities OA 1 0 Smoke mA yA MoneyandsmokearebothgoodsforAgentA Inefficiency NegativeExternalities OA 1 0 Smoke mA yA MoneyandsmokearebothgoodsforAgentA Better Inefficiency NegativeExternalities OB 1 0 Smoke mB yB MoneyisagoodandsmokeisabadforAgentB Better Inefficiency NegativeExternalities OB 1 0 Smoke mB yB MoneyisagoodandsmokeisabadforAgentB Inefficiency NegativeExternalities Whataretheefficientallocationsofsmokeandmoney Inefficiency NegativeExternalities OA 1 0 Smoke mA yA OB 1 0 Smoke mB yB Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations Inefficiency NegativeExternalities Supposethereisnomechanismbywhichmoneycanbeexchangedforchangesinsmokelevel WhatthenisAgentA smostpreferredallocation Isthisallocationefficient Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations A schoices Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations A smostpreferredchoiceisinefficient Inefficiency NegativeExternalities Continuetosupposethereisnomechanismbywhichmoneycanbeexchangedforchangesinsmokelevel WhatisAgentB smostpreferredallocation Isthisallocationefficient Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations B schoices Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations B smostpreferredchoice Inefficiency NegativeExternalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficientallocations B smostpreferredchoiceisinefficient Inefficiency NegativeExternalities SoifneitherAnorBcantrademoneyforchangesinsmokeintensity thentheoutcomeisinefficient Eitherthereistoomuchsmoke A smostpreferredchoice orthereistoolittlesmoke B schoice ExternalitiesandPropertyRights RonaldCoase sinsightisthatmostexternalityproblemsareduetoaninadequatespecificationofpropertyrightsand consequently anabsenceofmarketsinwhichtradecanbeusedtointernalizeexternalcostsorbenefits ExternalitiesandPropertyRights Causingaproducerofanexternalitytobearthefullexternalcostortoenjoythefullexternalbenefitiscalledinternalizingtheexternality ExternalitiesandPropertyRights NeitherAgentAnorAgentBownstheairintheirroom Whathappensifthispropertyrightiscreatedandisassignedtooneofthem ExternalitiesandPropertyRights SupposethatAgentBisassignedownershipoftheairintheroom AgentBcannowsell rightstosmoke Willtherebeanysmoking Ifso howmuchsmokingwiththerebeandwhatwillbetheequilibriumpriceforthisamountofsmoke ExternalitiesandPropertyRights Letp sA bethepricepaidbyAgentAtoAgentBinordertocreateasmokeintensityofsA ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sA sA ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sA Bothagentsgainandthereisapositiveamountofsmoking sA ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sA sA Establishingamarketfortradingrightstosmokecausesanefficientallocationtobeachieved ExternalitiesandPropertyRights SupposeinsteadthatAgentAisassignedtheownershipoftheairintheroom AgentBcannowpayAgentAtoreducethesmokeintensity Howmuchsmokingwilltherebe HowmuchmoneywillAgentBpaytoAgentA ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB sB p sB ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sB Bothagentsgainandthereisareducedamountofsmoking sB ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sB Establishingamarketfortradingrightstoreducesmokecausesanefficientallocationtobeachieved sB ExternalitiesandPropertyRights Noticethattheagentgiventhepropertyright asset isbetteroffthanathis herownmostpreferredallocationintheabsenceofthepropertyright Noticealsothattheamountofsmokingthatoccursinequilibriumtypicallydependsuponwhichagentisassignedthepropertyright ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sB p sA sA sB sB sA ExternalitiesandPropertyRights Isthereacaseinwhichthesameamountofsmokingoccursinequilibriumnomatterwhichoftheagentsisassignedownershipoftheairintheroom ExternalitiesandPropertyRights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p sB p sA sA sB ExternalitiesandPropertyRights OA 1 0 Smoke OB 1 0 Smoke yA yB p sB p sA sA sB Forbothagents theMRSisconstantasmoneychanges forgivensmokeintensity ExternalitiesandPropertyRights OA 1 0 Smoke OB 1 0 Smoke yA yB p sB p sA sA sB So forbothagents preferencesmustbequasilinearinmoney U m s m f s Coase sTheorem Coase sTheoremis Ifallagents preferencesarequasilinearinmoney thentheefficientleveloftheexternalitygeneratingcommodityisproducednomattertowhichagentitspropertyrightisassigned ProductionExternalities Considerasteelmillwhichproducesjointlysteelandpollution Thepollutionadverselyaffectsanearbyfishery Bothfirmsareprice takers pSisthemarketpriceofsteel pFisthemarketpriceoffish ProductionExternalities cS s x isthesteelfirm scostofproducingsunitsofsteeljointlywithxunitsofpollution Ifthesteelfirmdoesnotfaceanyoftheexternalcostsofitspollutionproductionthenitsprofitfunctionisandthefirm sproblemisto ProductionExternalities Thefirst orderprofit maximizationconditionsare ProductionExternalities Thefirst orderprofit maximizationconditionsare and ProductionExternalities statesthatthesteelfirm shouldproducetheoutputlevelofsteelforwhichprice marginalproductioncost ProductionExternalities statesthatthesteelfirm shouldproducetheoutputlevelofsteelforwhichprice marginalproductioncost istherateatwhichthefirm s internalproductioncostgoesdownasthepollutionlevelrises ProductionExternalities statesthatthesteelfirm shouldproducetheoutputlevelofsteelforwhichprice marginalproductioncost istherateatwhichthefirm s internalproductioncostgoesdownasthepollutionlevelrises so isthemarginalcosttothefirmofpollutionreduction ProductionExternalities isthemarginalcosttothefirmofpollutionreduction Whatisthemarginalbenefittothesteelfirmfromreducingpollution ProductionExternalities isthemarginalcosttothefirmofpollutionreduction Whatisthemarginalbenefittothesteelfirmfromreducingpollution Zero sincethefirmdoesnotfaceitsexternalcost Hencethesteelfirmchoosesthepollutionlevelforwhich ProductionExternalities andthefirst orderprofit maximizationconditionsare and E g supposecS s x s2 x 4 2andpS 12 Then ProductionExternalities determinestheprofit max outputlevelofsteel s 6 ProductionExternalities determinestheprofit max outputlevelofsteel s 6 isthemarginalcosttothefirm frompollutionreduction Sinceitgetsnobenefitfromthisitsetsx 4 ProductionExternalities determinestheprofit max outputlevelofsteel s 6 isthemarginalcosttothefirm frompollutionreduction Sinceitgetsnobenefitfromthisitsetsx 4 Thesteelfirm smaximumprofitlevelisthus ProductionExternalities ThecosttothefisheryofcatchingfunitsoffishwhenthesteelmillemitsxunitsofpollutioniscF f x Givenf cF f x increaseswithx i e thesteelfirminflictsanegativeexternalityonthefishery ProductionExternalities ThecosttothefisheryofcatchingfunitsoffishwhenthesteelmillemitsxunitsofpollutioniscF f x Givenf cF f x increaseswithx i e thesteelfirminflictsanegativeexternalityonthefishery Thefishery sprofitfunctionissothefishery sproblemisto ProductionExternalities Thefirst orderprofit maximizationconditionis ProductionExternalities Thefirst orderprofit maximizationconditionis ProductionExternalities Thefirst orderprofit maximizationconditionis Higherpollutionraisesthefishery smarginalproductioncostandlowersbothitsoutputlevelanditsprofit Thisistheexternalcostofthepollution ProductionExternalities E g supposecF f x f2 xfandpF 10 Theexternalcostinflictedonthefisherybythesteelfirmisxf Sincethefisheryhasnocontroloverxitmusttakethesteelfirm schoiceofxasagiven Thefishery sprofitfunctionisthus ProductionExternalities Givenx thefirst orderprofit maximizationconditionis ProductionExternalities Givenx thefirst orderprofit maximizationconditionis So givenapollutionlevelxinflicteduponit thefishery sprofit maximizingoutputlevelis ProductionExternalities Givenx thefirst orderprofit maximizationconditionis So givenapollutionlevelxinflicteduponit thefishery sprofit maximizingoutputlevelis Noticethatthefisheryproducesless andearnslessprofit asthesteelfirm spollutionlevelincreases ProductionExternalities Thesteelfirm ignoringitsexternalcostinflicteduponthefishery choosesx 4 sothefishery sprofit maximizingoutputlevelgiventhesteelfirm schoiceofpollutionlevelisf 3 givingthefisheryamaximumprofitlevelof Noticethattheexternalcostis 12 ProductionExternalities Arethesechoicesbythetwofirmsefficient Whenthesteelfirmignorestheexternalcostsofitschoices thesumofthetwofirm sprofitsis 36 9 45 Is 45thelargestpossibletotalprofitthatcanbeachieved MergerandInternalization Supposethetwofirmsmergetobecomeone Whatisthehighestprofitthisnewfirmcanachieve MergerandInternalization Supposethetwofirmsmergetobecomeone Whatisthehighestprofitthisnewfirmcanachieve Whatchoicesofs fandxmaximizethenewfirm sprofit MergerandInternalization Thefirst orderprofit maximizationconditionsare Thesolutionis MergerandInternalization Andthemergedfirm smaximumprofitlevelis Thisexceeds 45 thesumofthenon mergedfirms MergerandInternalization Mergerhasimprovedefficiency Onitsown thesteelfirmproducedx 4unitsofpollution Withinthemergedfirm pollutionproductionisonlyxm 2units Somergerhascausedbothanimprovementinefficiencyandlesspollutionproduction Why MergerandInternalization Thesteelfirm sprofitfunctionis sothemarginalcostofproducingxunitsofpollutionis and sinceitdoesnothavetofacetheexternalcostsofitspollution thesteelfirmincreasespollutionuntilthismarginalcostiszero hencex 4 MergerandInternalization Inthemergedfirmtheprofitfunctionis Themarginalcostofpollutionisthus MergerandInternalization Inthemergedfirmtheprofitfunctionis Themarginalcostofpollutionis MergerandInternalization Inthemergedfirmtheprofitfunctionis Themarginalcostofpollutionis Themergedfirm smarginalpollutioncostislargerbecauseitfacesthefullcostofitsownpollutionthroughincreasedcostsofproductioninthefishery solesspollutionisproducedbythemergedfirm MergerandInternalization Butwhyisthemergedfirm spollutionlevelofxm 2efficient MergerandInternalization Butwhyisthemergedfirm spollutionlevelofxm 2efficient Theexternalcostinflictedonthefisheryisxf sothemarginalexternalpollutioncostis MergerandInternalization Butwhyisthemergedfirm spollutionlevelofxm 2efficient Theexternalcostinflictedonthefisheryisxf sothemarginalexternalpollutioncostisThesteelfirm scostofreducingpollutionis MergerandInternalization Butwhyisthemergedfirm spollutionlevelofxm 2efficient Theexternalcostinflictedonthefisheryisxf sothemarginalexternalpollutioncostisThesteelfirm scostofreducingpollutionisEfficiencyrequires MergerandInternalization Mergerthereforeinternalizesanexternalityandinduceseconomicefficiency Howelsemightinternalizationbecausedsothatefficiencycanbeachieved TheTragedyoftheCommons Consideragrazingareaowned incommon byallmembersofavillage Villagersgrazecowsonthecommon Whenccowsaregrazed totalmilkproductionisf c wheref 0andf 0 Howshouldthevillagersgrazetheircowssoastomaximizetheiroverallincome TheTragedyoft