Externalities, Decreasing Returns, and Common Ownership

Placing production units under common ownership is often suggested as a solution to the problem of externalities. This will not always be true when there are decreasing returns to scale. An atomistic industry could be more efficient than a monopoly in some instances. Even when the "optimal" industry configuration would involve a finite number of producers, no two may have appropriate incentives to combine. An omniscient and benign regulator can always assure a more efficient outcome than would result from the combination of private producers. Whether real-world regulators should be called upon, however, is less clear.


Issue Date:
2001
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10457
Total Pages:
20
JEL Codes:
L23; Q24
Series Statement:
Discussion Paper 01-41




 Record created 2017-04-01, last modified 2017-08-23

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