Some regulatory programs are effective only if firms make some irreversible investments which reduce the cost of compliance. A firm potentially subject to regulation may therefore behave strategically - not investing and thus forcing the regulator to void the proposed regulation. We show that such incentives, which resemble a hold-up problem, may not be overcome when government's only tool is the imposition of an emissions tax.
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Paper provided by California Irvine - School of Social Sciences in its series Papers with number
95-96-9.
Find related papers by JEL classification: D20 - Microeconomics - - Production and Organizations - - - General D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D29 - Microeconomics - - Production and Organizations - - - Other