Alternative policy instruments under uncertainty: A programming model of toxic pollution control

This paper presents the results of a programming model which examines the relative performance of different regulatory regimes under uncertainty in controlling toxic wastes discharged by industry to a central treatment plant when the central is subject to threshold-type losses in treatment performance. Four regulatory regimes are examined: non-market quantity, price, marketable permit, and mixed price-quantity. The theoretical framework of the model is based on the analysis of prices vs quantities by Weitzman in 1974 and its extension to the case of a discontinuous threshold effect. The data used are based on the situation of Bridgeport, Connecticut, which has a number of metal finishing firms.