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Comparative Statics of a Monopolistic Firm Facing Rate-of-Return and Command-and-Control Pollution Constraints

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Author Info

  • Michael Caputo

    ()
    (University of Central Florida, Orlando, FL)

  • Dmitriy Popov

    ()
    (University of California, Davis, CA)

Abstract

The intrinsic comparative statics properties of a general rate-of-return regulated, profitmaximizing model of a monopolist facing a command-and-control pollution constraint are derived. Recent advances in the theory of comparative statics are used to derive the basic comparative statics of the model, which are contained in an observable negative semidefinite matrix and possess the form of Slutsky-like expressions. We consider several command-and-control pollution constraints that are commonly implemented in practice, and conclude that the intrinsic comparative statics properties of the model are qualitatively invariant to the type of command-andcontrol pollution constraint imposed. We compare our results with those extant, and find that several basic results from the standard A-J model no longer hold in our model.

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Bibliographic Info

Paper provided by University of Central Florida, Department of Economics in its series Working Papers with number 2010-06.

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Length: 28 Pages
Date of creation: Apr 2010
Date of revision: Jun 2012
Handle: RePEc:cfl:wpaper:2010-06

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Related research

Keywords: Averch-Johnson; Comparative statics; Command-and-control regulations;

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References

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  1. Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-34, June.
  2. Michael R. Caputo & M. Hossein Partovi, 2008. "Intrinsic comparative statics of a general class of profit-maximizing rate-of-return regulated firms," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 369-382, April.
  3. M. Hossein Partovi & Michael R. Caputo, 2006. "A Complete Theory Of Comparative Statics For Differentiable Optimization Problems," Metroeconomica, Wiley Blackwell, vol. 57(1), pages 31-67, 02.
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