Tell it by myself…
中文：外部性，又可以被理解为溢出效果，是由 A 对 B 产生的活动带来的对 C（第三方）的影响，就放佛车辆产生的空气污染对社会带来影响，就是一个典型的例子。它可以从一个 producer 转移到另一个 producer 里面。
如何外部问题内部化呢？著名 Professor Pigou 解决了这个问题
Definition: One agent’s welfare (utility or profit) affected directly by action of another one in the economy, it is not taken into account by the price system. And it is a kind of Market Failure
Although the externality could be between producer and producer, producer and consumer, consumer and consumer, for convenience, we still isolate the Producer and Producer case, because it can analyze easier by number, to calculate the utility. (See Utility Theory)
Some Examples:
Positive Examples:
- Provision of Public Goods
- Education
- Vaccination during a pandemic
Positive Externalities means your own choice output is less than the max social benefit (which is the efficient quantities), otherwise it is a negative externalities
Sometimes we use subsidy to improve the efficiency of positive externalities, while we use taxes to reduce the negative externalities
Producer and Producer
Pigou ways
MSC means Social Marginal Cost. (of course, in Marginal Social Cost)
It can be written as or , both are correct.
It is easy to see that the is the optimal choice for social benefit, and the difference between and would be larger and larger since the increasing.
So it is easy to conclude that the Firm A would produce too much! How to avoid this situation, let hit to be a “Good boy” ? The professor Pigou gives a situation and with its famous Pigou Tax
Question: after lead in the traditional Monopoly curve, will lead to another method different form Pigou
Tax isn’t always the best solution
Only Pigou?
2023.4.14 Coase Theorem leads in a different solution, which is a different idea from Pigou, however, the problem is that we can’t measure the exact social marginal cost directly.
Reference
维基： https://zh.wikipedia.org/zh-tw/%E5%A4%96%E9%83%A8%E6%80%A7