In Chapter 10, contest models are utilized to illuminate crucial elements of traditional economic problems. These include competition for surplus within divisionalized firms, where inefficient divisions often dominate efficient ones; the significant expenses required to attain a monopoly position, including potentially bribing public officials for the allocation of monopoly rights; and the expenses incurred in obtaining property rights that, once secured (sometimes by violent and costly means), will be efficiently exchanged in the marketplace. In the last two cases, these expenses are so substantial that they might leave no social surplus. Additionally, the cost of political campaigns, in which factions compete for the vote to control a portion or entirety of the public sector through convincing voters of the correct choice, is also examined. Overall, it is shown that contests introduce a substantial and previously unnoticed welfare cost to the traditional issues studied, thereby complementing the existing literature on the subject.

Chapter 16 establishes the concept of an externality, a situation where a decision carries additional costs or benefits to a party not involved in the decision-making process. The chapter classifies several types of externalities and explores how and why they lead to undesirable outcomes. Then potential solutions to externalities as well as their strengths and weaknesses are discussed: subsidies, taxes, regulation, and the assignment of property rights. The chapter ends with a discussion of cost–benefit analysis and its role in evaluating interventions aimed at combatting externality problems.

Our objective in this chapter is to provide an overview of resource and environmental economics by putting environmental economic theories in the context of bioeconomy, and by outlining the fundamental characteristics of an economics approach to environmental analysis. The analysis develops along three lines: (1) market failures and the environment,; (2) sustainability and intergenerational equity,; (3) optimal management of resources. To this end, the chapter provides a discussion on the economy– environment interdependence, how this concept develops in the context of bioeconomy (including a discussion on the circular use of resources), and which tools can be used to model it.

The traditional economic model implies that ownership is irrelevant for resource allocation. This result is known as the Coase Theorem. The Coase Theorem is just an idea, not a reality. Its importance comes from understanding its logic. It relies on the assumption of zero transaction costs. When this assumption is violated, then the way ownership is organized matters. Hence, a theory of ownership, or a theory of the allocation of property rights, must be based on models of positive transaction costs.

This chapter applies the framework of exclusive property and liability rules originated by Calabresi and Melamed and developed by many others. Within this overarching framework, a detailed law and economics analysis is applied to the fundamental question of whether exclusive property or liability rules should govern interoperability standards and SEIP. The conclusion is reached that the general preference for exclusive property rules should be maintained. Key exceptions to this general presumption should be maintained, notably where two conditions are satisfied: (i) the existence of multiple IPRs reading on the same standard gives rise to a Cournot complements problem; and (ii) where the imposition of legal remedies (e.g. injunction) would have the effect of prohibiting significant non-infringing conduct, such as in circumstances where a patent may protect only one of many innovative features of a product. Consideration is also given to appropriate remedies for infringement of SEIP, and in particular to the correct principles for the calculation of damages in the form of reasonable royalty.

Though economists typically eschewed non-welfarist arguments in the post-WWII period, there is at least one prominent instance in which such arguments were very much in play, both directly and as underpinnings for welfare-related arguments: The debate over the Coase theorem. This debate saw the Coase theorem regularly challenged on both welfarist (efficiency) and non-welfarist grounds. This then raises the question of what it was about the Coase theorem that led economists into this non-welfarist territory. This essay revisits the early debates over the Coase theorem, where non-welfarist arguments featured prominently, in order to bring out the nature of those arguments and attempt to understand the rationale(s) for their deployment. As we shall see, this move was a function of forces internal and external to economics, including the environmental turn in society and the profession, a concern with issues of fairness and equity in the evaluation of how to resolve externality problems, and a view, prominent in certain quarters, that the environment and environmental preservation is an end in itself.

The concept of externality is introduced, as well as the various ways of “internalizing” them. Particular emphasis is given to the Coasean approach of contracts and its limitations. The limitations of the Coasean approach are connected to the problem of public good provision. Applications to media and vaccines are given.