Efficiency and nonlinear pricing in nonconvex environments with externalities: A generalization of the Lindahl equilibrium concept |
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| Institution: | 1. Yale University, United States;2. Santa Fe Institute, United States;3. University of Virginia, Darden School of Business, United States;1. New Economic School, Russian Federation;2. CEPR, United Kingdom of Great Britain and Northern Ireland;3. Department of Economics, Florida State University, Tallahassee, FL 32306-2180, USA;1. School of Management of Anhui Jianzhu University, Hefei, China;2. School of Management of Hefei University of Technology, Hefei, China;1. Geisel School of Medicine at Dartmouth, 46 Centerra Parkway, Lebanon, NH 03766, United States;2. C. Everett Koop Institute, Dartmouth-Hitchcock Norris Cotton Cancer Center, One Medical Center Drive, Lebanon, NH 03756, United States;1. COPPEAD Graduate Business School, Federal University of Rio de Janeiro, Brazil;2. Department of Economics, University of Lisbon, Rua Miguel Lupi, 20, 1249-078 Lisbon, Portugal |
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| Abstract: | It is a well-known fact that if damaging externalities occur, nonconvexities will necessarily arise in the underlying economic environment rendering questionable the relevance of standard market approaches to the allocation problem. In response to this state of affairs, we define and study a generalization of the Lindahl Equilibrium concept that allows for nonlinear pricing systems in which the marginal outlay may depend on the quantity purchased. This “Generalized Lindahl Equilibrium” attains local pareto efficiency for its associated allocations and is able to support (in the usual sense) any pareto efficient allocation that satisfies a regularity condition. |
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