【正文】 B’s most preferred choice Inefficiency amp。 Negative Externalities ?So if neither A nor B can trade money for changes in smoke intensity, then the oute is inefficient. ?Either there is too much smoke (A’s most preferred choice) or there is too little smoke (B’s choice). Externalities and Property Rights ?Ronald Coase’s insight is that most externality problems are due to an inadequate specification of property rights and, consequently, an absence of markets in which trade can be used to internalize external costs or benefits. Externalities and Property Rights ?Causing a producer of an externality to bear the full external cost or to enjoy the full external benefit is called internalizing the externality. Externalities and Property Rights ?Neither Agent A nor Agent B owns the air in their room. ?What happens if this property right is created and is assigned to one of them? Externalities and Property Rights ?Suppose that Agent B is assigned ownership of the air in the room. ?Agent B can now sell “rights to smoke”. ?Will there be any smoking? ?If so, how much smoking with there be and what will be the equilibrium price for this amount of smoke? Externalities and Property Rights ?Let p(sA) be the price paid by Agent A to Agent B in order to create a smoke intensity of sA. Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sA) sA Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sA) Both agents gain and there is a positive amount of smoking. sA Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sA) sA Establishing a market for trading rights to smoke causes an efficient allocation to be achieved. Externalities and Property Rights ?Suppose instead that Agent A is assigned the ownership of the air in the room. ?Agent B can now pay Agent A to reduce the smoke intensity. ?How much smoking will there be? ?How much money will Agent B pay to Agent A? Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB sB p(sB) Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sB) Both agents gain and there is a reduced amount of smoking. sB Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sB) Establishing a market for trading rights to reduce smoke causes an efficient allocation to be achieved. sB Externalities and Property Rights ?Notice that the agent given the property right (asset) is better off than at his/her own most preferred allocation in the absence of the property right. ?Notice also that the amount of smoking that occurs in equilibrium typically depends upon which agent is assigned the property right. Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sB) p(sA) sA ??sB sB sA Externalities and Property Rights ?Is there a case in which the same amount of smoking occurs in equilibrium no matter which of the agents is assigned ownership of the air in the room? Externalities and Property Rights OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB p(sB) p(sA) sA = sB Externalities and Property Rights OA 1 0 Smoke OB 1 0 Smoke yA yB p(sB) p(sA) sA = sB For both agents, the MRS is constant as money changes, for given smoke intensity. Externalities and Property Rights OA 1 0 Smoke OB 1 0 Smoke yA yB p(sB) p(sA) sA = sB So, for both agents, preferences must be quasilinear in money。 s* = 6. Production Externalities p ss ? ?12 2 ,determines the profitmax. output level of steel。 s*