Externalities and Managing a Common Property Resource
Length: 1 Hour or Less
Discipline: Food and Resource Economics
Level: Intermediate (majors and non-majors)
Author: Duke, Joshua
One difficulty in controlling pollution is that individuals and firms acting in their own best interest may produce aggregate behavior that is suboptimal for society. This problem uses externalities produced by four firms in a common property setting to demonstrate the suboptimal result with simple numbers. Then, market and non-market resolutions are investigated. The problem is self-contained and designed for groups of four students.