A Cournot Mechanism for Pollution Control under Asymmetric Information
AbstractThe contribution of this paper is to show that a simple nonlinear tax can achieve a long-run socially optimal level of pollution without the regulator knowing marginal abatement costs. Firms are charged their differential contribution to total damages, evaluated at the upper margin of current emissions. This induces a Cournot game in pollution levels. We show that the Nash equilibrium exists, corresponds to the socially optimal long-run output and emission levels and number of firms, is stable, and can be reached by iterative computations where conjectures are formed using a linear estimator based on past emission levels. Copyright Kluwer Academic Publishers 1999
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Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.
Volume (Year): 14 (1999)
Issue (Month): 3 (October)
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Web page: http://www.springerlink.com/link.asp?id=100263
externalities; pollution taxes; differential damages; Cournot games;
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