Coasian equilibrium |
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| Institution: | 1. Department of Economics, Vanderbilt University, 415 Calhoun Hall, Nashville, TN 37235, USA;2. Boalt Hall School of Law, University of California, Berkeley, Berkeley, CA 94720, USA;1. College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China;2. Department of Finance and Insurance, Lingnan University, Hong Kong;1. Department of Mathematical Sciences, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA;2. Department of Mathematics, Zhejiang Normal University, Jinhua 321000, China;3. Department of Mathematics, Shanghai University, Shanghai 200444, China;1. Faculty of Arts and Social Sciences, Sabanci University, Orhanli, Tuzla, 34956, Istanbul, Turkey;2. School of Economics, University of Surrey, Guildford, GU2 7XH, UK;1. Department of Economics, Public University of Navarre, Campus Arrosadia, 31006 Pamplona, Spain;2. Departamento de Análisis Económico II, Universidad Nacional de Educación a Distancia (UNED), Paseo Senda del Rey 11, 28040 Madrid, Spain;3. Fundación de Estudios de Economía Aplicada (FEDEA), Calle Jorge Juan 46, 28001 Madrid, Spain |
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| Abstract: | 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 Starrett, D., 1972. Fundamental nonconvexities in the theory of externalities. Journal of Economic Theory 4, 180–199] 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. |
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