Externalities and Asymmetric Information - Jeremy Greenwood：外部性和信息不对称-杰瑞米Greenwood.pdfVIP

EXTERNALITIES AND ASYMMETRIC INFORMATION* JEREMYGREENWOOD AND R. PRESTONMCAFEE A reconsideration of the Pigovian theory of regulating externalities via taxation is undertaken for environments with private information. The presence of private information may have no effect on the social optimum; but when it has an impact, it is to cause a group of different agents to share the same production or consumption levels. The model developed provides an appealing characterization of when such situations transpire: they occur when the individuals who desire most to engage in some activity are the ones who society least wants to participate. Since such instances could potentially be regulated by the imposition of quantity controls, this may explain authorities apparent predilection for quantity limits rather than tax-cum-subsidy schemes to manage many externalities. I. INTRODUCTION In the textbook model of externalities, the size of the external effects depends solely on the quantity of the commodity produced and not upon who produces it [Pigou, 1960; Meade, 1952]. For example, it is irrelevant whether two firms produce 50 tons of noxious pollutants each, or one discharges 100 tons of effluent and the other zero. In such a world the external effects of pollution can be efficiently regulated by imposing a per unit effluent tax that is the same for all producers. Some externalities, however, do not share this irrelevance of the identity of the producer, and this is the subject of the current paper. In particular, consider the case of education. The external effects of educati