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- W2082373190 abstract "When consumers exhibit present bias, the standard solution to market failures caused by externalities—Pigouvian pricing—is suboptimal. I investigate policies aimed at externalities for present-biased consumers. Optimal policy includes an instrument to correct the externality and an instrument to correct the present bias. Either instrument can be an incentive-based policy (e.g. a tax on fuel economy) or a command-and-control policy (e.g. a fuel economy mandate). Under consumer heterogeneity, a command-and-control policy may dominate an incentive-based policy. Calibrated to the US automobile market, simulation results suggest that the second-best gasoline tax is 3–30% higher than marginal external damages. The optimal price policy includes a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non-hybrid car by about $550–$2200 relative to the price of an average hybrid car." @default.
- W2082373190 created "2016-06-24" @default.
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- W2082373190 date "2015-07-01" @default.
- W2082373190 modified "2023-10-10" @default.
- W2082373190 title "Optimal policy instruments for externality-producing durable goods under present bias" @default.
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- W2082373190 doi "https://doi.org/10.1016/j.jeem.2015.04.002" @default.
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