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 ?
Although we do not have data on contracts, it is a testable empirical question whether existing renter contracts internalize the intertemporal externality imposed by renters on future renters and the landowner.
If the presence of the steel plant will benefit other industries already located in the adjacent industrial zone--serving both the demand and supply side of the industrial products market--this positive market externality should be considered.
As proved in Proposition 1, this assumption on the lack of heterogeneity in consumption externality across households is innocuous in terms of existence and uniqueness of an equitable steady state as long as [[theta].
First, we confirm the existence of the accident externality arising from driving in Taiwan both on the average number of kilometers driven per month per vehicle and on the total number of speeding tickets per month.
However, this classic example of a positive externality could easily, if perhaps somewhat less naturally, be recharacterized as a negative externality.
The previous section demonstrated that city shapes were strongly correlated, not with the size of retail externalities in total, but with the size of the externality effect falling within city borders.
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).
Ng, as we have already noted, assumed away 'bargaining cost' in his 1971 discussion, and in 1975 he elaborated on this, saying that what he had in mind in 1971 was that 'the cost of bargaining and enforcing agreements between parties to an existing externality are negligible' (1975: 272).
Both price and cap-and-trade systems can lead to socially efficient outcomes, as in the case of a carbon tax, by internalizing the negative externality.
Fortunately, due to the presence of the public university, with it's support reflected in the respective founds and the resulting commitment that comes with them, if any company decides to undertake a project of the network, it creates a positive externality for all the other projects or companies involved, increasing the possibility to create the necessary critical mass.