Скачать презентацию Externality Managerial Economics Jack Wu Externalities one Скачать презентацию Externality Managerial Economics Jack Wu Externalities one

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Externality Managerial Economics Jack Wu Externality Managerial Economics Jack Wu

Externalities one party directly conveys benefit or cost to others positive negative benchmark: collective Externalities one party directly conveys benefit or cost to others positive negative benchmark: collective marginal benefit = collective marginal cost

Saks: Fifth Avenue vs Mall New York, NY: 611 Fifth Avenue Stamford, CT: Town Saks: Fifth Avenue vs Mall New York, NY: 611 Fifth Avenue Stamford, CT: Town Center Mall Chevy Chase, MD: 5555 Wisconsin Ave Mc. Clean, VA: Tysons Galleria Externalities (c) 1999 -2001, Ivan Png

Sak’s Positive Externalities Marginal benefit/cost (Hundred thousand dollars) 15 13. 4 group marginal benefit Sak’s Positive Externalities Marginal benefit/cost (Hundred thousand dollars) 15 13. 4 group marginal benefit 10 Sak’s marginal benefit 9 florist’s marginal benefit 4 3. 6 profit gain from additional investment 1 0. 8 marginal cost 0 1 shoe store’s marginal benefit 5 9 10 Hundred thousand dollars of investment

Sak’s Negative Externalities Marginal benefit/cost (Hundred thousand dollars) 10 marginal benefit profit gain from Sak’s Negative Externalities Marginal benefit/cost (Hundred thousand dollars) 10 marginal benefit profit gain from reducing investment group marginal cost b a 2 Sol’s marginal cost 1 0 c 5 7. 5 9 Sak’s marginal cost 10 Hundred thousand dollars of investment

Silicon Valley Stanford University Xerox Palo Alto Research Center Hewlett-Packard Cisco Systems 3 Com Silicon Valley Stanford University Xerox Palo Alto Research Center Hewlett-Packard Cisco Systems 3 Com Yahoo! Externalities (c) 1999 -2001, Ivan Png

Financial Centers • • London: The City New York: Wall Street Hong Kong: Central Financial Centers • • London: The City New York: Wall Street Hong Kong: Central Singapore: Raffles Place Externalities (c) 1999 -2001, Ivan Png

Resolving Externalities Economic inefficiency ® opportunity for profit merger collective action Resolving Externalities Economic inefficiency ® opportunity for profit merger collective action

Intel Inside Cooperative advertising resolves positive externality from one retailer to other retailers Externalities Intel Inside Cooperative advertising resolves positive externality from one retailer to other retailers Externalities (c) 1999 -2001, Ivan Png

Network Externality where benefit/cost depends on total number in network English language Internet email Network Externality where benefit/cost depends on total number in network English language Internet email international telephone service

Network Effect benefit/cost depends on total number in network through market, not directly conveyed Network Effect benefit/cost depends on total number in network through market, not directly conveyed resolved by producer or service provider

Critical Mass definition: number of users at which demand becomes positive Critical Mass definition: number of users at which demand becomes positive

Network Effects: Demand Elasticity highly elastic around tipping point highly inelastic at low demand Network Effects: Demand Elasticity highly elastic around tipping point highly inelastic at low demand levels

Public Good Non-rival consumption -- one person’s increase does not reduce quantity to others Public Good Non-rival consumption -- one person’s increase does not reduce quantity to others q extreme economy of scale

Television Distinguish content delivery Externalities (c) 1999 -2001, Ivan Png Television Distinguish content delivery Externalities (c) 1999 -2001, Ivan Png

Rivalness congestible private good rival consumption public good non-rival consumption Rivalness congestible private good rival consumption public good non-rival consumption

Efficiency in Public Good Marginal benefit/cost ($ per minute) 10 8. 9 vertical sum Efficiency in Public Good Marginal benefit/cost ($ per minute) 10 8. 9 vertical sum of marginal benefits 5. 6 marginal cost 5 4 3. 6 Alan Mary 1 0. 8 0 Peter 1 4 5 Minutes of fireworks 10

Excludability Provider can exclude particular consumer law technology Excludability Provider can exclude particular consumer law technology

Excludability: Law patent – product or process copyright – artistic expression Excludability: Law patent – product or process copyright – artistic expression

Intellectual Property trade-off benefit from usage incentive for future creation Externalities (c) 1999 -2001, Intellectual Property trade-off benefit from usage incentive for future creation Externalities (c) 1999 -2001, Ivan Png

Discussion Let b represent marginal benefit and q the amount of Sogo’s investment in Discussion Let b represent marginal benefit and q the amount of Sogo’s investment in the new Zhong. Xiao Fushing store. Suppose that the investment generates marginal benefis, b=10 -q for Sogo, b=4 -0. 4 q for the florist, and b=1 -0. 2 q for the shoe store. Given the marginal cost of 1, calculate the profit-maximizing quantity of Sogo’s investment and the economically efficient quantity of Sogo’s investment.