Bài giảng MicroEconomics - Chapter 016 Public Goods, Externalities, and Information Asymmetries

Public Goods, Externalities, and Information AsymmetriesChapter 16McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter ObjectivesPublic goods vs. private goodsThe optimal quantity of a public goodCost-benefit analysisExternalitiesInformation failures and government intervention16-2Public GoodsPrivate goodsRivalry and excludabilityPublic goodsNonrivalryNonexcludabilityFree-rider problemNo market demand16-3Optimal Quantity of a Public GoodSupplied by the governmentGovernment estimates demandCompare marginal benefit to marginal costDemand for a public goodSum individual willingness to paySum vertically16-4Demand for Public Goods(1)QuantityOf PublicGood(2)Adams’WillingnessTo Pay (Price)(3)Benson’sWillingnessTo Pay (Price)(4)CollectiveWillingnessTo Pay (Price)12345$43210$54321$97531+++++=====Example: two individualsGraphically16-5Demand for Public Goods$975310PQ12345$6543210PQ12345$6543210PQ12345AdamsBensonCollective Demand and SupplyD1D2DCSAdams’ DemandBenson’s DemandCollective Demand$3 for 2 Items$4 for 2 Items$7 for 2 Items$1 for 4 Items$2 for 4 Items$3 for 4 ItemsConnect the DotsCollectiveWillingnessTo PayOptimalQuantity16-6Cost-Benefit AnalysisProvide a public good?How much should be provided?Resources are limitedMarginal-cost-marginal-benefit ruleAllocate government resources to maximize net benefit16-7ExternalitiesMarket failureRequires government actionNegative externalityExternal costOverproduction Positive externalityExternal benefitUnderproduction 16-8ExternalitiesNegative ExternalitiesPositive Externalities0DSStOverallocationNegativeExternalitiesStUnderallocationPositiveExternalitiesQoQoQeQePP0QQDDt16-9Coase TheoremExternalities corrected by individual bargainingProperty ownership definedSmall number peopleBargaining costs negligibleLimitations Liability rules and lawsuits16-10Government InterventionCorrect negative externalityDirect controlsSpecific taxesCorrect positive externalitySubsidize buyers or producersGovernment provision16-11Market Based ApproachTragedy of the commonsResource lacks defined ownershipAir, lakes, etc.No incentive to maintainMarket for externality rightsRight to polluteCan be bought and sold16-12Market for Pollution RightsAdvantagesReal-world examplesD2008D2018S=Supply of Pollution Rights5007501000$100$200P0QPrice Per Pollution RightQuantity of 1-Ton Pollution Rights16-13Optimal Externality ReductionHow much pollution abatement?MC = MB0Society’s Marginal Benefit and MarginalCost of Pollution Abatement (Dollars)Q1MBMCSociallyOptimal AmountOf PollutionAbatement16-14Climate ChangeEarth has warmed over the last centuryHuman activity contributing factorCarbon dioxide and greenhouse effectKyoto Protocol 1997Climate change policies16-15Climate ChangeCarbon-Dioxide Emissions, Tons Per Capita, Selected Nations 2005United StatesAustraliaCanadaCzech RepublicGermanyJapanUnited KingdomSpainItalyFrance0 5 10 15 20 25Source: OECD Environmental Data16-16Information FailuresAsymmetric informationInadequate buyer informationGasoline marketLicensing of surgeonsInadequate seller informationMoral hazard problemAdverse selection problemWorkplace safetyQualification16-17Lojack: A Case of Positive ExternalitiesCrime reduction expenditures $300 billionSome redistribute vs. reduce crimeLojack car recoveries 95% vs. 60% External benefitsCatch thievesLocate and stop chop shopsMSB 15 times the MCUnderallocationPolicy to encourage use of Lojack?16-18Key Termsprivate goodspublic goodsfree-rider problemcost-benefit analysismarginal-cost-marginal-benefit ruleexternalitiesCoase theoremtragedy of the commonsmarket for externality rightsoptimum reduction of an externalitycap-and-trade programclimate-change problemasymmetric informationmoral hazard problemadverse selection problem16-19Next Chapter PreviewPublic Choice Theoryand the EconomicsOf Taxation16-20