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| Author: | Nagler, M.G. |
| Title: | Negative externalities, competition and consumer choice |
| Journal: | Journal of Industrial Economics
2011 : SEP, VOL 59:3, p.396-421 |
| Index terms: | externalities competition consumer behaviour economic policy government prices |
| Language: | eng |
| Abstract: | Consumers occasionally make choices which impose greater external costs on those not choosing similarly. This paper inspects how the selectivity of negative externalities in such situations affects the competitive equilibrium and the need of an externality-reducing public procedure. Selective negative externalities create network externalities, but outcomes may be greatly different from typical network effects. Price effects may result in the imposing product's sales declining with the size of the negative externality. Consequently, a positive competitive effect may dominate the externality's negative direct welfare effects, such that a policy enlarging the externality may improve welfare. |
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