Externalities, Monopoly and the Objective Function of the Firm

University of Birmingham Economics Working Paper No. 02-01

35 Pages Posted: 15 Apr 2005

See all articles by David Kelsey

David Kelsey

University of Exeter Business School - Department of Economics

Frank Milne

Queen's University - Department of Economics

Date Written: July 21, 2004

Abstract

This paper provides a theory of general equilibrium with externalities and/or monopoly. We assume that the firm's decisions are based on the preferences of shareholders and/or other stakeholders. Under these assumptions a firm will produce fewer negative externalities than the comparable profit maximising firm. In the absence of externalities, equilibrium with a monopoly will be Pareto efficient if the firm can price discriminate. The equilibrium can be implemented by a 2-part tariff.

Keywords: Externality, general equilibrium, 2-part tariff, objective function of the firm

Suggested Citation

Kelsey, David and Milne, Frank, Externalities, Monopoly and the Objective Function of the Firm (July 21, 2004). University of Birmingham Economics Working Paper No. 02-01. Available at SSRN: https://ssrn.com/abstract=692064 or http://dx.doi.org/10.2139/ssrn.692064

David Kelsey (Contact Author)

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

Streatham Court
Exeter, Devon EX4 4PU
United Kingdom
013 9226 2536 (Phone)

HOME PAGE: http://people.exeter.ac.uk/dk210/

Frank Milne

Queen's University - Department of Economics ( email )

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