Externality


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Externality

The cost or benefits of a transaction to parties who do not directly participate in it. Externality can be either positive or negative. For example, a merger can lead to higher share prices and bonuses for employees, benefiting shareholders and employees at the two companies merging, This can create wealth and positively impact a community. On the other hand, the merger can drive a competitor out of business, which results in layoffs and reduced wealth, which can hurt a community. Externality is also called spillover or the neighborhood effect. See also: External benefit, External cost.
References in periodicals archive ?
Thus, we could estimate the accident externality conditional on the individual's own driving.
On this latter point, Coase is once again highly critical of the "blackboard economics" approach of modern welfare economies and economists who too quickly see an externality as a result of market failure "requiting corrective government action [that] is, in fact, often the result of government action" (Coase 1960: 28).
Projects in which there is a positive (negative) externality are on the right (left) side of the 45 degree line.
position to gather information about the externality more effectively
13) There will be a similar negative externality if such efforts interfere with victims' ability to form profitable social networks, as in Dharmapala and Garoupa (2004).
There is no externality associated with the consumption of the good.
In the end, it is the task of regulators, not investors, to address this externality.
A positive externality exists when some of the benefits accrue to those other than the purchaser.
Finally, even if a project is expected to create an externality that a local government values, competition from other jurisdictions will force a transfer of some of the benefits to the investing firm.
Externality theory is used to claim that markets fail.
The author's hypothesis is "that the perception of externality, that the world is external to and independent of us, is merely the subjective reflection of our original sin, the preconception of autonomy, what we call the ego" (p.