[经济学]04 Lecture 4-externality.pdfVIP

Lecture 4 Externalities Binzhen Wu Tsinghua University Outline Externality theory Definition Underprovision problem in the competitive market. How to address externality problem? Private-sector solutions Public-sector solutions Which one is better? Externality-definition Externalities arise whenever the actions of one party make another party worse or better off, yet the first party neither bears the costs nor receives the benefits of doing so. Negative externality