History : sunk cost or widespread externality? : second Arcelli lecture at the University of Piacenza, April 2007
Hammond, Peter J., 1945- (2007) History : sunk cost or widespread externality? : second Arcelli lecture at the University of Piacenza, April 2007. [Coventry]: University of Warwick, Department of Economics. (Warwick economic research papers).
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In an intertemporal Arrow-Debreu economy with a continuum of agents, suppose that the auctioneer sets prices while the government institutes optimal lump-sum transfers period by period. An earlier paper showed how subgame imperfections arise because agents understand how their current decisions such as those determining investment will influence future lump-sum transfers. This observation undermines the second efficiency theorem of welfare economics and makes "history" a widespread externality. A two-period model is used to investigate the constrained efficiency properties of different kinds of equilibrium. Possibilities for remedial policy are also discussed.
|Alternative Title:||Arcelli lecture (2007)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Efficiency wage theory, Welfare economics, Equilibrium (Economics)|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||[Coventry]|
|Official Date:||July 2007|
|Number of Pages:||25|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Available As:||Hammond, P.J. (2007) History : sunk cost or widespread externality? Rivista Internazionale di Scienze Sociali, No.2, pp.161–185.|
Allais, M. (1943, 1952). A la recherche d'une discipline economique; second ed. published as Traité d'Economie Pure. Paris: Ateliers Industria; and Imprimerie Nationale.
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