HUMBOLDT-UNIVERSITT ZU BERLIN

WIRTSCHAFTSWISSENSCHAFTLICHE FAKULTT
INSTITUT FR FINANZWISSENSCHAFT Prof. Dr. BENGT-ARNE WICKSTRM

Theory of Public Economics I: Market Failure

Prof. Dr. Bengt-Arne Wickstrm Tuesday 12.00-14.00 Spandauer Strae 1, Room 203

Exercises
Jens Barthel Thursday 12.00-14.00 Alexanderplatz 5, Room 11.31B

Grading:
For six of the exercises home work assignments will be distributed. Solutions are due two weeks after distribution. The average of the four best assignments counts with 1/3 towards the final grade. The final examination counts with 2/3. Please note that each part must be completed successfully, you have to pass the final exam and the assignments to pass the course.

Literature:
[1] ARYE L. HILLMAN: Public Finance and Public Policy, Cambridge University Press, Cambridge 2003. [2] JOSEPH E. STIGLITZ: Economics of the Public Sector, 2nd Edition, W. W. Norton & Co., New York, ISBN: 0-393-96651-8. [3] ANTHONY B. ATKINSON and JOSEPH E. STIGLITZ: Lectures on Public Economics, McGraw-Hill, London 1980. [4] JOHN LEACH: A Course in Public Economics, Cambridge University Press, Cambridge 2004. [5] ALAN J. AUERBACH and MARTIN FELDSTEIN (Eds.): Handbook of Public Economics, Vol. 1-2, North Holland, Amsterdam 1985. [6] YEW-KWANG NG: Welfare Economics: Introduction and Development of Basic Concepts, MacMillan Press, Houndsville 1992. [7] HAL R. VARIAN: Microeconomic Analyis, 3rd Edition, W. W. Norton & Co., New York, ISBN: 0-393-95735-7. [8] HAL R. VARIAN: Intermediate Microeconomics, 3rd Edition, W. W. Norton & Co., New York, ISBN: 0-393-98042-1. [9] RICHARD A. MUSGRAVE, PEGGY B. MUSGRAVE and LORE KULLMER: Die ffentlichen Finanzen in Theorie und Praxis, Teil 1, 5. Auflage, UTB Mohr, Tbingen 1994, ISBN: 3-8252-0449-9.

Overview of the lectures with literature recommendations

1.

Introduction: Market Failure vs. Efficiency of Market

[1] Supplement 1A & 1B [2] Chapter 1 [3] Chapter 11 [4] Chapter 1, 2, 3, 4, 5, & 26 [6] Chapter 2

7. Lindahl Equilibrium
[1] Chapter 2 & 3

8. Lindahl Equilibrium and Clarke Taxes

[3] Chapter 16 (509-512) [4] Chapter 20

2.

Tragedy of Commons
[1] Supplement 4A [4] Chapter 8 [8] Chapter 31 [9] Chapter 3

9. Financing Collective Goods

[1] Chapter 3 & 8 [5] Chapter 10 [6] Chapter 7 [7] Chapter 23 [9] Chapter 3

3. Externalities Inability of Exclusion

[1] Chapter 4 [4] Chapter 6 & 7

10. Theory of Clubs

[3] Chapter 17 [5] Chapter 11 [6] Chapter 8

4. Nature as a Factor of Production

[1] Chapter 4 [2] Chapter 8 [9] Chapter 3 & 28

11. Peak Load Pricing

[3] Chapter 15 [5] Chapter 3 [9] Chapter 28

5. Nonrivalry in Production
[1] Chapter 8 [2] Chapter 7 [4] Chapter 14, 15 & 21 [8] Chapter 23 [9] Chapter 28

12. Moral Hazard

[4] Chapter 19

13. Adverse Selection

[4] Chapter 19

6. Nonrivalry in Consumption
[1] Chapter 2 & 3 [3] Chapter 16 [4] Chapter 10, 11, 12 & 13 [5] Chapter 9 [6] Chapter 8 [9] Chapter 3

14. Adverse Selection and Insurance Markets

[4] Chapter 22 [7] Chapter 25

Exercise sessions will be held every week starting with the 4.11.2004. Homework assignments: Please put your answers in the institutes mail box on the ground floor. Deadline: Thursday, 12:00.
HOMEWORK ASSIGNMENT 1 2 3 4 5 6 DISTRIBUTION 18.11.2004 02.12.2004 16.12.2004 06.01.2005 20.01.2005 03.02.2005 DUE DATE 02.12.2004 16.12.2004 06.01.2005 20.01.2005 03.02.2005 17.02.2005