A lot of western families nowadays have pets at home, and they spend a considerable amount of money on them. Pet animal are a great source of fun and comfort, hence their popularity. But despite this high demand, there is also and oversupply, because demand is picky on the breeds and features of the animals, and older animals are sometimes rejected. Pet are unusual goods, as one cannot dispose of them easily (they have implicit some rights to humane treatment), and they multiply rapidly while spaying or neutering them is expensive. The consequence: an overpopulation of pets.
Stephen Coate and Brian Knight argue that there is also an externality from breeding new pets, as the cuties crowd out older pets. They claim the solution is to tax young pets and subsidize spaying. Welfare gaisn from this policy are substantial, they estimate, in the range of 16 to 21 billion US$ a year.