Public Finance, 4th Edition

Chapter 22: Externalities in a Second-Best Environment

1. The Second-Best Allocation of Samuelsonian Nonexclusive Goods 
   1. Preferences and Social Welfare 
   2. Production and Market Clearance 
   3. Social Welfare Maximization 
   4. Relationships Between First-Best and Second-Best Allocations 
   5. Concluding Comment 
2. The Coase Theorem, Bargaining, and Private Information 
   1. Bargaining Set Stability and the Coase Theorem 
      1. Bargaining Set Stability 
   2. Private Information 
      1. Market Power and Private Information 
      2. Nonexclusive Externalities 
   3. Concluding Comments 
3. References 

We saw in Chapters 6–8 that first-best models of externalities dichotomize in two important respects for policy purposes. One is that the government can pursue appropriate ...