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A bad is a physical object that lowers a consumer's level of happiness, or stated alternately, a bad is an object whose consumption or presence lowers the utility of the consumer.
With normal goods, a two-party transaction results in the exchange of money for some object, as when money is exchanged for a car. With a bad, however, both money and the object in question go the same direction, as when a household gives up both money and garbage to a waste collector being compensated to take the garbage. In this way, garbage has a negative price; the waste collector is receiving both garbage and money and thus is paying a negative amount for the garbage.
Goodness and badness are an inherently subjective declaration, however. As an example: two diners at a restaurant discover that the "secret ingredient" in the house specialty is peanuts. One of the diners is a peanut-lover, and the other is allergic to peanuts. In this case, peanuts are, in the same time and in the same place, both a good and a bad in economic terms.
- Varian, Hal R. (2006), Intermediate Microeconomics (London: W.W. Norton & Company)
- Peter Smith (2012), "Bad Economics" (Melbourne: Connor Court Publishing)
- Chore division - the problem of fairly dividing a heterogeneous bad among agents with different preferences.