Externalities and the Calculation of Exchange Outcomes

Abstract

Externalities have been defined by marketers as the uncalculated costs and/or benefits of exchange, where uncalculated refers to costs and benefits that have not been accurately included in the exchange valuation (Mundt 1993). This article suggests that anticipation and valuation are necessary for accurate calculation of exchange outcomes and discusses their difficulties as they relate to externalities. A dyadic exchange relationship is then studied, as it relates to exchange parties having symmetric or asymmetric knowledge, to determine whether the uncalculated effects are first-or third-party effects. This design manifests a tripartite analysis. The article concludes with a discussion of how first parties and third parties attempt to manage externalities.