Externalities, Decreasing Returns, and Common Ownership

R. David Simpson

RFF Working Paper Series from Resources for the Future

Abstract: Placing production units under common ownership is often suggested as a solution to the problem of externalities. This will not always be true when there are decreasing returns to scale. An atomistic industry could be more efficient than a monopoly in some instances. Even when the "optimal" industry configuration would involve a finite number of producers, no two may have appropriate incentives to combine. An omniscient and benign regulator can always assure a more efficient outcome than would result from the combination of private producers. Whether real-world regulators should be called upon, however, is less clear.

Keywords: Externalities; Mergers; Returns to Scale; Incentives (search for similar items in EconPapers)
JEL-codes: L23 Q24 (search for similar items in EconPapers)
Date: 2001-08-01
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