Optimal Management of Durable Pollution
AbstractThis paper studies an incompletely informed regulator's problem of inducing a firm producing durable pollution to adopt a socially optimal pollution storage technology. We construct a sparse, yet flexible, theoretical model that can be applied directly to concrete situations as it is stated explicitly in terms of statistical parameters. Next, we show the existence of an optimal regulatory contract and examine its qualitative features for one of the many regulatory problems suggested by the general model. Our model extends the standard inventory model by making the firm's storage technology a strategic choice induced by the regulatory contract. Moreover, by providing a structural model of the firm, our model generates useful information that has to be assumed in an abstract regulatory model.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 113.
Length: 41 pages
Date of creation: Jan 2003
Date of revision:
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
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