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SoSe16 Int. Environmental Economics and Int. Political Issues

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Karten 10
Sprache Deutsch
Kategorie VWL
Stufe Universität
Erstellt / Aktualisiert 23.05.2016 / 25.05.2016
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III.1 Market Failure

  1. non-rival -> under-provision of Public Goods
  2. non-exclusion -> Tragedy of Commons/Allmende: overuse
  3. Externalities

III.2 Envionment as a public good

Problem No. 1: under-provision of public good

  • each player gets an equal share but cooperators have to additionally bear the costs of their contributions
  • free-ride problem
    -> leads to rational/dominating solution "no investments"
    -> leads to a deadlock in a state of mutual defection

Solution: public goods should not be allocated through the market merchanism, in orde to prevent a misallocation of ressources
 

III.3.1 Environment as a common good

Problem No.2: Tragedy of the Commons

"When doing what's good for u isn't good for u." - Hardin 1968

  • Private optimum:
    • Average Revenue = Marginal Private Cost
    • 2€(48-2A production function) = 8 private costs => A=22
  • Social optimum:
    • Marginal Revenue = Marginal Private Cost
    • Profit: Pi= 2€*A*(48-2A)-8A
    • Pi'= 88-8A = 0 => A**=11

III.3.2 Environment as a common good

Problem No.2: Tragedy of the Commons
-> 2 Solutions

  1. Regulating the use of the resource
  2. Creating and allocating property rights to the resource