Comment by esafak
19 hours ago
1. If you can price the cost of the externality, you can justify optimizing it.
2. Monopolies and situations with the principal/agent dilemma are less sensitive to such concerns.
19 hours ago
1. If you can price the cost of the externality, you can justify optimizing it.
2. Monopolies and situations with the principal/agent dilemma are less sensitive to such concerns.
> 1. If you can price the cost of the externality, you can justify optimizing it.
An externality is usually a cost you don't pay (or pay only a negligible amount of). I don't see how pricing it helps justify optimizing it.
You are right. I should say perceived externality; there may be a price that is discounted.