A Property-Rights Approach for Unifying the Teaching of Externalities, Moral Hazard, and Market Power

20 Pages Posted: 29 Oct 2004

See all articles by Paul Thorsnes

Paul Thorsnes

University of Otago - School of Business - Department of Economics

Paul Sicilian

Grand Valley State University

Date Written: October 15, 2004

Abstract

We show how several concepts that are treated separately in general economics texts - externalities, moral hazard, and collusion - submit to a unified treatment based on a standard analysis of property rights. Most texts recognize externalities as a problem of open access to a resource. We show that moral hazard, which is usually viewed as an information problem, is more usefully viewed as cheating on a common-property resource. We also show that while the efficiency implications differ, the logic of the textbook analysis of monopoly, oligopoly, and competition is identical to the analysis of private, common-property, and open-access resources. Unifying the analysis of these concepts is time-efficient and emphasizes the common economic intuition, reinforcing economic principles while demonstrating the power of basic economic reasoning.

JEL Classification: A2, D6

Suggested Citation

Thorsnes, Paul and Sicilian, Paul, A Property-Rights Approach for Unifying the Teaching of Externalities, Moral Hazard, and Market Power (October 15, 2004). Available at SSRN: https://ssrn.com/abstract=610724 or http://dx.doi.org/10.2139/ssrn.610724

Paul Thorsnes

University of Otago - School of Business - Department of Economics ( email )

PO Box 56
Dunedin
New Zealand

Paul Sicilian (Contact Author)

Grand Valley State University ( email )

Seidman School of Business
1 Campus Drive
Allendale, MI 49401-9403
United States
616-895-6611 (Phone)
616-895-3286 (Fax)

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