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Production externalities and expectations application to the economics of climate change

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  • Antoine Mandel

    (Centre d'Economie de la Sorbonne)

Abstract

In this paper, we extend the problem of decentralization of Pareto optima in an economy with production externalities to the case where the production capacities upon which Pareto optimality is defined may differ from the aggregate of the firms expectations about their production possibilities. This issue is raised in order to deal with the seemingly different expectations of firms and governments about the economic consequences of climate change. We show the government can create a "production allowance" market in order to force the firms to produce in a way it considers as optimal. The results are then applied to the analysis of the economic and welfare consequences of climate change

Suggested Citation

  • Antoine Mandel, 2007. "Production externalities and expectations application to the economics of climate change," Documents de travail du Centre d'Economie de la Sorbonne b07028, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:b07028
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    References listed on IDEAS

    as
    1. Jean-Marc Bonnisseau, 1994. "Caractérisation des optima de pareto dans une économie avec effets externes," Annals of Economics and Statistics, GENES, issue 36, pages 97-112.
    2. Bonnisseau, Jean-Marc & Cornet, Bernard, 1988. "Existence of equilibria when firms follow bounded losses pricing rules," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 119-147, April.
    3. Boyd, John III & Conley, John P., 1997. "Fundamental Nonconvexities in Arrovian Markets and a Coasian Solution to the Problem of Externalities," Journal of Economic Theory, Elsevier, vol. 72(2), pages 388-407, February.
    4. Luenberger, David G., 1995. "Externalities and benefits," Journal of Mathematical Economics, Elsevier, vol. 24(2), pages 159-177.
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    More about this item

    Keywords

    General equilibrium theory; Pareto Optimality; externalities;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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