ABSTRACT

Azariadis, Costas and Joseph E. Stiglitz, “Implicit Contracts and Fixed-Price Equilibria”, Quarterly Journal of Economics, 98/3 supplement (1983): 1-22

Bator, Francis M., “The Anatomy of Market Failure”, Quarterly Journal of Economics, 72/8 (1958): 351-79

Baumol, William J., John C. Panzar and Robert D. Willig, Contestable Markets and the Theory of Industry Structure, revised edition, San Diego, Harcourt Brace, 1988

Coase, Ronald, “The Problem of Social Cost”, Journal of Law and Economics, 3 (1960): 1-44

Demsetz, Harold, “Why Regulate Utilities?”, Journal of Law and Economics, 11 (1968): 55-66

Laffont, Jean-Jacques, Externalities entry in The New Palgrave: Allocation, Information and Markets, edited by John Eatwell, Murray Milgate and Peter Newman, London: Macmillan, 1989

Oakland, William, H., “Theory of Public Goods” in Handbook of Public Economics, edited by Alan J. Auerbach and Martin Feldstein, vol. 2, Amsterdam and New York: North Holland, 1987: 485-537

Samuelson, Paul A., “The Pure Theory of Public Expenditure”, Review of Economics and Statistics, 36 (1954): 387-89

Samuelson, Paul A., “Diagrammatic Exposition of a Theory of Public Expenditure”, Review of Economics and Statistics, 37/4 (1955): 350-56

Economic theory acknowledges that there are times when markets do not lead spontaneously to allocative efficiency. BATOR shows that market failure occurs when the conditions for the first welfare theorem are not fulfilled, as is the case where there are indivisibilities in consumption, increasing returns to scale in production, and externalities. For him these are all reasons for state intervention.