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• W2039104514 abstract "We consider a general equilibrium model with a production externality (e.g. pollution), where the regulator does not observe firm productivity shocks. We examine quantity (permit) regulation and price (tax) regulation. The quantity of permits issued by the regulator are independent of the productivity shock, since shocks are unobserved. Price regulation implies use of the regulated input is an increasing function of the productivity shock because firms take advantage of a good productivity shock by increasing input use. Thus price regulation generates higher average, but more variable, production. Therefore, we show that in general equilibrium the relative advantage of quantity versus price regulation depends not only on the slopes of marginal benefits and costs, but on general equilibrium effects such as risk aversion. The general equilibrium effects are often more important than the slopes of the marginal benefits and cost curves. In the simplest model, a reasonable risk aversion coefficient implies quantity regulation generates higher welfare regardless of the benefit function." @default.
• W2039104514 created "2016-06-24" @default.
• W2039104514 creator A5026584694 @default.
• W2039104514 date "2005-11-01" @default.
• W2039104514 modified "2023-10-17" @default.
• W2039104514 title "Price and quantity regulation in general equilibrium" @default.
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• W2039104514 doi "https://doi.org/10.1016/j.jet.2004.07.006" @default.
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