Optimal quasi-market choice in the presence of pollution externalities |
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Authors: | Robert A Collinge Martin J Bailey |
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Institution: | University of Louisville, Louisville, Kentucky 40292, USA;University of Maryland, College Park, Maryland 20742, USA |
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Abstract: | When the relationship between emissions and ambient pollution is known, it is possible to implement a program to achieve economically efficient pollution levels, even when the control agency knows nothing about the victim's valuation of pollution damages or about emission abatement costs. Unlike a Pigouvian tax, the program provides the correct incentives for entry and exit whether or not marginal damages from a firm's emissions vary over the range of these emissions. Through the provision of “missing” markets, sizable revenues are raised while allocative distortions are corrected. |
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