Abstract
This chapter discusses externalities and public goods. One major class of dependence between agents is gathered under the name external effects. The fundamental common feature of all types of externalities is that the acts of one agent affect the set of feasible acts of other agents. The result may either be that the other agents obtain a larger set of possible choices, positive external effect, or they experience a reduction of their possibilities of choice, a negative external effect. The agents affecting each other by their choices may be producers or consumers depending on the particular type of external effect considered. Public goods are the commodities for which the amounts consumed are identical for all consumers, and thus, equal to the total amounts available.
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