We consider the influence of a nearest-neighbor Coulomb interaction in
an extended Hubbard model and introduce an interaction term which sim
ulates atomic polarizabilities. The inclusion of atomic polarizabiliti
es in the model has the effect of screening the on-site Coulomb intera
ction for charged excitations, unlike a neighbor Coulomb interaction w
hich reduces energies of neutral local excitations, leaving the conduc
tivity gap unchanged. This is supported by an exact diagonalization st
udy on small, mainly one dimensional, extended Mott-Hubbard systems. F
or large V, the system undergoes a phase transition from a spin-densit
y wave (SDW) to a charge-density wave (CDW). It is shown that the SDW/
CDW phase transition cannot be described correctly when using effectiv
e parameters, but that screening effects have to be included explicitl
y. Also other phases, one of which is ferroelectric, appear when atomi
c polarizabilities are included in the model Hamiltonian. We study C-6
0 in terms of the degenerate extended Hubbard model with screening eff
ects.