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Prices versus Quantities across Jurisdictions
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
Harvard Univ, Dept Econ, Cambridge, MA 02138 USA.
2019 (English)In: Journal of the Association of Environmental and Resource Economists, ISSN 2333-5955, E-ISSN 2333-5963, Vol. 6, no 5, p. 883-891Article in journal (Refereed) Published
Abstract [en]

We extend the standard "prices versus quantities" framework for pollution control to cover multiple heterogeneous jurisdictions interacting strategically with each other. When multi-jurisdictional externalities are present and the uncertainties among jurisdictions are independent, the regulatory game exhibits a unique subgame perfect equilibrium. For any one jurisdiction, the equilibrium choice of instrument is given by the sign of the original prices versus quantities formula. Thus, it is an optimal strategy for a jurisdiction to choose a price instrument when the slope of its own marginal benefit is less than the slope of its own marginal cost and a quantity instrument when this condition is reversed. The result suggests that the original nonstrategic criterion for the comparative advantage of prices over quantities may have wider applicability to determining instrument choice in a noncooperative strategic environment.

Place, publisher, year, edition, pages
UNIV CHICAGO PRESS , 2019. Vol. 6, no 5, p. 883-891
Keywords [en]
prices versus quantities, regulatory instruments, global pollution
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-390381DOI: 10.1086/704493ISI: 000473050900001OAI: oai:DiVA.org:uu-390381DiVA, id: diva2:1341571
Available from: 2019-08-09 Created: 2019-08-09 Last updated: 2019-08-09Bibliographically approved

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Mideksa, Torben

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