01:220:102 Lecture Notes - Lecture 15: Coase Theorem, Free Rider Problem, Deadweight Loss

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Barbara Crockett

Document Summary

Public goods: non-exclusionary & non-rival: market failure of public goods = free-rider problem; leads to scarcity of resources b/ c people are self-interested. Common goods lead 2 tragedy of commons: if we don"t own a resource, we have an incentive to use that resource w/o replenishing it; there"s no private property. People aren"t internalizing the cost of their actions w/ public & common goods. Negative externality: econ. activity that has negative spillover effect (pollution, second hand smoking, noise pollution, when there are costs associated w/ production/consumption of good/service that have not been borne by actual producers & consumers. Positive externality: econ. activity that has positive spillover effect. Tuesday, november 3, 2015: when there are bene ts associated w/ production and/or consumption of good/service that are enjoyed by ppl who aren"t actual producers & consumers, results in demand curve not equal to marginal social bene t curve. Left to its own devices, market is at qmarket.