中級微觀經(jīng)濟學英文版課件：第33章 外部效應(yīng)

1、Chapter Thirty-ThreeExternalities外部效應(yīng)StructureDefinitionConsumption externalityProduction externalityThe tragedy of commonsExternalitiesAn externality is a cost or a benefit imposed upon someone by actions taken by others. The cost or benefit is thus generated externally to that somebody.An external

2、ly imposed benefit is a positive externality.An externally imposed cost is a negative externality.Examples of Negative ExternalitiesAir pollution.Water pollution.Loud parties next door.Traffic congestion.Second-hand cigarette smoke.Examples of Positive ExternalitiesA well-maintained property next do

3、or that raises the market value of your property.A pleasant cologne or scent worn by the person seated next to you.Improved driving habits that reduce accident risks.Education.Externalities and EfficiencyCrucially, an externality impacts a third party; i.e. somebody who is not a participant in the a

4、ctivity that produces the external cost or benefit.Externalities and EfficiencyExternalities cause Pareto inefficiency; typicallytoo much scarce resource is allocated to an activity which causes a negative externalitytoo little resource is allocated to an activity which causes a positive externality

5、.Externalities and Property RightsAn externality is viewed as a purely public commodity.A commodity is purely public ifit is consumed by everyone (nonexcludability), andeverybody consumes the entire amount of the commodity (nonrivalry in consumption). E.g. a broadcast television program.Consumption

6、ExternalityPareto efficient amount of smokeInefficient equilibrium with negative externalityProperty rights and price mechanismQuasi-linear utility and the Coase theorem (科斯定理)Consider two agents, A and B, and two commodities, money and smoke.Both smoke and money are goods for Agent A.Money is a goo

7、d and smoke is a bad for Agent B.Smoke is a purely public commodity.Consumption ExternalityAgent A is endowed with $yA.Agent B is endowed with $yB.Smoke intensity is measured on a scale from 0 (no smoke) to 1 (maximum concentration).Consumption ExternalityOA10SmokemAyAMoney and smoke areboth goods f

8、or Agent A.Consumption ExternalityOA10SmokemAyAMoney and smoke areboth goods for Agent A.BetterConsumption ExternalityOB10SmokemByBMoney is a good and smokeis a bad for Agent B.BetterConsumption ExternalityOB10SmokemByBMoney is a good and smokeis a bad for Agent B.BetterConsumption ExternalityPareto

9、 Efficient AllocationsWhat are the efficient allocations of smoke and money?OA10SmokemAyAOB10SmokemByBPareto Efficient AllocationsOA10SmokemAOB10SmokemByAyBPareto Efficient AllocationsOA10SmokemAOB10SmokemByAyBPareto Efficient AllocationsOA10SmokemAOB10SmokemByAyBPareto Efficient AllocationsOA10Smok

10、emAOB10SmokemByAyBEfficientallocationsPareto Efficient AllocationsInefficiency & Negative ExternalitiesSuppose there is no means by which money can be exchanged for changes in smoke level.What then is Agent As most preferred allocation?Is this allocation efficient?Inefficiency & Negative Externaliti

11、esOA10SmokemAOB10SmokemByAyBEfficientallocationsInefficiency & Negative ExternalitiesOA10SmokemAOB10SmokemByAyBEfficientallocationsAs choicesInefficiency & Negative ExternalitiesOA10SmokemAOB10SmokemByAyBEfficientallocations As mostpreferred choiceis inefficientInefficiency & Negative ExternalitiesC

12、ontinue to suppose there is no means by which money can be exchanged for changes in smoke level.What is Agent Bs most preferred allocation?Is this allocation efficient?Inefficiency & Negative ExternalitiesOA10SmokemAOB10SmokemByAyBEfficientallocationsBs choicesInefficiency & Negative ExternalitiesOA

13、10SmokemAOB10SmokemByAyBEfficientallocations Bs mostpreferred choiceInefficiency & Negative ExternalitiesOA10SmokemAOB10SmokemByAyBEfficientallocations Bs mostpreferred choiceis inefficientInefficiency & Negative ExternalitiesSo if A and B cannot trade money for changes in smoke intensity, then the

14、outcome is inefficient.Either there is too much smoke (As most preferred choice) or there is too little smoke (Bs choice).Externalities and Property RightsRonald Coases insight is that most externality problems are due to an inadequate specification of property rights and, consequently, an absence o

15、f markets in which trade can be used to internalize external costs or benefits.Externalities and Property RightsCausing a producer of an externality to bear the full external cost or to enjoy the full external benefit is called internalizing the externality(外部效應(yīng)內(nèi)部化).Externalities and Property Rights

16、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 RightsSuppose 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, h

17、ow much smoking and what will be the price for this amount of smoke?Externalities and Property RightsLet p(sA) be the price paid by Agent A to Agent B in order to create a smoke intensity of sA.Externalities and Property RightsOA10SmokemAOB10SmokemByAyBExternalities and Property RightsOA10SmokemAOB1

18、0SmokemByAyBExternalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sA)sAExternalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sA)Both agentsgain andthere is apositiveamount ofsmoking.sAExternalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sA)sAEstablishinga market fortrading righ

19、tsto smoke causes an efficientallocation tobe achieved.Externalities and Property RightsSuppose 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?Ex

20、ternalities and Property RightsOA10SmokemAOB10SmokemByAyBExternalities and Property RightsOA10SmokemAOB10SmokemByAyBExternalities and Property RightsOA10SmokemAOB10SmokemByAyBsBp(sB)Externalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sB)Both agentsgain andthere is areducedamount ofsmoking.s

21、BExternalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sB)Establishinga market fortrading rightsto reducesmoke causes an efficientallocation tobe achieved.sBExternalities and Property RightsNotice that theagent given the property right is better off than at her own most preferred allocation i

22、n the absence of the property right.amount of smoking that occurs in equilibrium depends upon which agent is assigned the property right.Externalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sB)p(sA)sA sBsBsAExternalities and Property RightsIs there a case in which the same amount of smoking

23、occurs in equilibrium no matter which agent is assigned ownership of the air in the room?Externalities and Property RightsOA10SmokemAOB10SmokemByAyBp(sB)p(sA)sA = sBExternalities and Property RightsOA10SmokeOB10SmokeyAyBp(sB)p(sA)sA = sBFor both agents, the MRS is constant asmoney changes, for given

24、 smoke intensity.Externalities and Property RightsOA10SmokeOB10SmokeyAyBp(sB)p(sA)sA = sBSo, for both agents, preferences must bequasilinear in money; U(m,s) = m + f(s).Coases TheoremCoases Theorem is: If all agents preferences are quasilinear in money, then the efficient level of the externality ge

25、nerating commodity is produced no matter which agent is assigned the property right.Production ExternalitiesA steel mill produces jointly steel and pollution.The pollution adversely affects a nearby fishery.Both firms are price-takers.pS is the market price of steel.pF is the market price of fish.Is

26、sues of InterestIndependent firmsMerger and internalizationNon-merger solutionsProperty rights and price mechanismCoase theoremProduction ExternalitiescS(s,x) is the steel firms cost of producing s units of steel jointly with x units of pollution.If the steel firm does not face any of the external c

27、osts of its pollution production then its profit function is and the firms problem is toProduction ExternalitiesThe first-order profit-maximizationconditions areProduction ExternalitiesThe first-order profit-maximizationconditions areandProduction Externalitiesstates that the steel firmshould produc

28、e the output level of steelfor which price = marginal production cost.Production Externalitiesstates that the steel firmshould produce the output level of steelfor which price = marginal production cost.is the rate at which the firmsinternal production cost goes down as thepollution level risesProdu

29、ction Externalitiesstates that the steel firmshould produce the output level of steelfor which price = marginal production cost.is the rate at which the firmsinternal production cost goes down as thepollution level rises, sois the marginal cost to thefirm of pollution reduction.Production Externalit

30、iesis the marginal cost to thefirm of pollution reduction.What is the marginal benefit to the steelfirm from reducing pollution?Production Externalitiesis the marginal cost to thefirm of pollution reduction.What is the marginal benefit to the steelfirm from reducing pollution?Zero, since the firm do

31、es not face itsexternal cost.Hence the steel firm chooses the pollutionlevel for whichProduction Externalitiesand the first-order profit-maximizationconditions areandE.g. suppose cS(s,x) = s2 + (x - 4)2 andpS = 12. ThenProduction Externalitiesdetermines the profit-max.output level of steel; s* = 6.P

32、roduction Externalitiesdetermines the profit-max.output level of steel; s* = 6.is the marginal cost to the firmfrom pollution reduction. Since it getsno benefit from this it sets x* = 4. Production Externalitiesdetermines the profit-max.output level of steel; s* = 6.is the marginal cost to the firmf

33、rom pollution reduction. Since it getsno benefit from this it sets x* = 4. The steel firms maximum profit level isthusProduction ExternalitiesThe cost to the fishery of catching f units of fish when the steel mill emits x units of pollution is cF(f,x). Given f, cF(f,x) increases with x; i.e. the ste

34、el firm inflicts a negative externality on the fishery.Production ExternalitiesThe cost to the fishery of catching f units of fish when the steel mill emits x units of pollution is cF(f,x). Given f, cF(f,x) increases with x; i.e. the steel firm inflicts a negative externality on the fishery.The fish

35、erys profit function isso the fisherys problem is toProduction ExternalitiesThe first-order profit-maximizationcondition isProduction ExternalitiesThe first-order profit-maximizationcondition isProduction ExternalitiesThe first-order profit-maximizationcondition isHigher pollution raises the fishery

36、smarginal production cost and lowers bothits output level and its profit. This is theexternal cost of the pollution.Production ExternalitiesE.g. suppose cF(f;x) = f2 + xf and pF = 10.The external cost inflicted on the fisheryby the steel firm is xf. Since the fisheryhas no control over x it must tak

37、e the steelfirms choice of x as a given. The fisherysprofit function is thusProduction ExternalitiesGiven x, the first-order profit-maximizationcondition isProduction ExternalitiesGiven x, the first-order profit-maximizationcondition isSo, given a pollution level x inflicted uponit, the fisherys pro

38、fit-maximizing outputlevel isProduction ExternalitiesGiven x, the first-order profit-maximizationcondition isSo, given a pollution level x inflicted uponit, the fisherys profit-maximizing outputlevel isNotice that the fishery produces less, andearns less profit, as the steel firmspollution level inc

39、reases.Production Externalities The steel firm, ignoring its external cost inflicted upon the fishery,chooses x* = 4, so the fisherysprofit-maximizing output level given thesteel firms choice of pollution level isf* = 3, giving the fishery a maximumprofit level ofNotice that the external cost is $12

40、.Production ExternalitiesAre these choices by the two firms efficient?When the steel firm ignores the external costs of its choices, the sum of the two firms profits is $36 + $9 = $45.Is $45 the largest possible total profit that can be achieved?Merger and InternalizationSuppose the two firms merge

41、to become one. What is the highest profit this new firm can achieve?Merger and InternalizationSuppose the two firms merge to become one. What is the highest profit this new firm can achieve?What choices of s, f and x maximize the new firms profit?Merger and InternalizationThe first-order profit-maxi

42、mizationconditions areThe solution isMerger and InternalizationAnd the merged firms maximum profitlevel isThis exceeds $45, the sum of the non-merged firms.Merger and InternalizationMerger has improved efficiency.On its own, the steel firm produced x* = 4 units of pollution.Within the merged firm, p

43、ollution production is only xm = 2 units.So merger has caused both an improvement in efficiency and less pollution production. Why?Merger and InternalizationThe steel firms profit function is so the marginal cost of producing x unitsof pollution isWhen it does not have to face theexternal costs of i

44、ts pollution, the steelfirm increases pollution until this marginalcost is zero; hence x* = 4.Merger and InternalizationIn the merged firm the profit function isThe marginal cost of pollution is thusMerger and InternalizationIn the merged firm the profit function isThe marginal cost of pollution isM

45、erger and InternalizationIn the merged firm the profit function isThe marginal cost of pollution isThe merged firms marginal pollution costis larger because it faces the full cost ofits own pollution through increased costsof production in the fishery, so lesspollution is produced by the merged firm

46、.Merger and InternalizationBut why is the merged firms pollution level of xm = 2 efficient?Merger and InternalizationBut why is the merged firms pollution level of xm = 2 efficient?The external cost inflicted on the fishery is xf, so the marginal external pollution cost isMerger and InternalizationB

47、ut why is the merged firms pollution level of xm = 2 efficient?The external cost inflicted on the fishery is xf, so the marginal external pollution cost isThe steel firms marginal cost of reducing pollution is Merger and InternalizationBut why is the merged firms pollution level of xm = 2 efficient?

48、The external cost inflicted on the fishery is xf, so the marginal external pollution cost isThe steel firms marginal cost of reducing pollution is Efficiency requiresMerger and Internalization42xMerger and InternalizationMerger therefore internalizes an externality and induces economic efficiency.Ho

49、w else might internalization be caused so that efficiency can be achieved?Coase and Production ExternalitiesCoase argues that the externality exists because neither the steel firm nor the fishery owns the water being polluted.Suppose the property right to the water is created and assigned to one of

50、the firms. Does this induce efficiency?Coase and Production ExternalitiesSuppose the fishery owns the water.Then it can sell pollution rights, in a competitive market, at $px each.The fisherys profit function becomesCoase and Production ExternalitiesSuppose the fishery owns the water.Then it can sel

51、l pollution rights, in a competitive market, at $px each.The fisherys profit function becomesGiven pf and px, how many fish and how many rights does the fishery wish to produce? (Notice that x is now a choice variable for the fishery.)Coase and Production ExternalitiesThe profit-maximum conditions a

52、reCoase and Production ExternalitiesThe profit-maximum conditions areand these give(fish supply)(pollutionright supply)Coase and Production ExternalitiesThe steel firm must buy one right for every unit of pollution it emits so its profit function becomesGiven pf and px, how much steel does the steel

53、 firm want to produce and how many rights does it wish to buy?Coase and Production ExternalitiesThe profit-maximum conditions areCoase and Production ExternalitiesThe profit-maximum conditions areand these give(steel supply)(pollutionright demand)Coase and Production ExternalitiesIn a competitive market for pollution rightsthe price px must adjust to clear the marketso, at equilibrium,Coase and Production ExternalitiesIn a competitive market for pollution rightsthe price px must adjust to clear the marketso, at equilibrium,The market-clearing price for pollutionrights is thusCoase