| Abstract: | Our paper (Firm incentives to promote technological change in pollution control, J. Environ. Econom. Management 17, 247–265 (1989)) concluded that firms will most actively search for new abatement technology under taxes and auctioned permits. However, Marin (Firm incentives to promote technological change in pollution control: Comment, J. Environ. Econom. Management, 21, 297–300 (1991)) argues that we overstated the efficacy of auctioned permits: that we used an unrealistic assumption which might affect our findings; that auctions may misallocate permits and are administratively burdensome; and that innovation detection is difficult under this regime. Here we show that our results are largely unchanged when the assumption questioned by Marin is relaxed. We also argue that he overstates the other concerns. |
