Premium
Dynamic Externalities and Policy Coordination
Author(s) -
Datta Manjira,
Mirman Leonard J.
Publication year - 2000
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00204
Subject(s) - externality , economics , cournot competition , microeconomics , production (economics) , nash equilibrium , capital (architecture) , partial equilibrium , general equilibrium theory , archaeology , history
The paper introduces trade into dynamic models with externalities and capital accumulation, and evaluates the efficiency of the Cournot–Nash equilibrium. It considers mixed economies characterized by a blend of strategic and nonstrategic sectors. Also, there are two sources of interdependence: the existence of production externalities and the endogenous determination of market prices. It is shown that policy coordination is not needed when preferences are the same. In this case, the production externalities are internalized, so that an inefficient solution becomes the efficient integrated world equilibrium due to trade.