Internalizing externalities: Roles of networks, clubs and policy commitments

Abstract

Externalities arising from actions of one player in the economy and directly affecting the well-being of another are ubiquitous. In these situations, market equilibria often fail to be efficient. This dissertation explores the roles of networks, clubs and policy commitments in the internalization of externalities and thus in the generation of efficient outcomes. The first essay examines how network-based social incentives would affect the provision of public goods in endogenous networks. The second essay analyzes results of the formation of multiple climate clubs, as well as the role of free trade agreements among club members therein. The third essay studies effects of policy commitments to the provision of a new global-warming-relieving technology called solar radiation management relative to effects of policy commitments to carbon mitigation.