Economics of Market Failure

5 Credit points

Short description

This module deals with publicly provided goods, public enterprises, and the regulation of private households and companies, for example through the levying of eco-taxes. The chapters “Public Goods” and “Public Provision of Private Goods” essentially address the question of whether a purely market-based supply of goods is efficient in economic terms (free-rider problem of public goods provision) or socially desirable (equal opportunities through public provision of private goods such as school education or medical care). Closely linked to public goods are “external effects,” such as climate change caused by greenhouse gas emissions. The central question here is what advantages and disadvantages the regulatory measures used in practice (e.g., CO2 tax, CO2 certificates, subsidization of “green” technologies) have in relation to each other. Another topic is “natural monopolies,” which occur, for example, in industries that depend on pipeline networks (electricity, water, rail). The companies operating in these sectors are often publicly owned (e.g., Deutsche Bahn) or heavily regulated by politics (e.g., Federal Network Agency).

Qualification Goals

Students are familiar with the fundamental topics and analytical methods of public economics. They acquire empirical knowledge and microeconomic methods to identify, analyze, and evaluate various situations constituted by market failure. In particular, students are acquainted with various methods of government regulation and capable of examining the incentive and impact effects of these. They can apply their knowledge to specific inquiries and case studies.

Content

Economic analysis of various instances of market failure (e.g., public goods, externalities, public enterprises, distributional effects of public expenditures) and the incentive and impact effects of public regulatory instruments.

Components and semester hours per week

Lecture (2 semester hours per week) and supplementary study class (1 semester hour per week)

Frequency

Winter semester

Examination performance

Written examination (60 minutes).