Comment by esafak
1 day 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 day 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.