Regulating Altruistic Agents
AbstractAltruism or `regard for others' can encourage self-restraint among generators of negative externalities, thereby mitigating the externality problem. We explore how introducing impure altruism into standard regulatory settings alters regulatory prescriptions. We show that the optimal calibration of both quantitative controls and externality taxes are affected. It also leads to surprising results on the comparative performance of instruments. Under quantity-based regulation welfare is increasing in the propensity for altruism in the population; under price-based regulation the relationship is non-monotonic. Price-based regulation is preferred when the population is either predominantly altruistic or predominantly selfish, quantity-based regulation for cases in between.
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Bibliographic InfoPaper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 1010.
Date of creation: May 2010
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Other versions of this item:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-CBE-2010-06-04 (Cognitive & Behavioural Economics)
- NEP-MIC-2010-06-04 (Microeconomics)
- NEP-REG-2010-06-04 (Regulation)
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