Free Disposal

Abstract

‘I should like to buy an egg, please’ she said timidly. ‘How do you sell them?’ ‘Fivepence farthing for one – twopence for two,’ the Sheep replied.

‘Then two are cheaper than one?’ Alice said, taking out her purse.

‘Only you must eat them both if you buy two,’ said the Sheep.

‘Then I’ll have one please’, said Alice, as she put the money down on the counter. For she thought to herself, ‘They mightn’t be at all nice, you know.’ (Lewis Carroll, Through the Looking-Glass)

If I dislike a commodity, you may have to pay to get me to accept it. But so long as some otherwise non-sated consumer finds this commodity to be desirable, or at least harmless, it could not have a negative price in competitive equilibrium. Likewise, if some firm can dispose of arbitrary amounts of a commodity without using any other inputs or producing any other (possibly noxious) outputs, its price in competitive equilibrium cannot be negative. Therefore competitive equilibrium analysis can be confined to the case of non-negative prices if every commodity is either harmless to someone or freely disposable.