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Regulating ambient pollution when social costs are unknown

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  • Charles Figuières
  • Marc Willinger

Abstract

This paper offers a new mechanism in order to Nash-implement a Pareto optimal level of ambient pollution. As usual in the literature on non point source pollution, the proposed scheme is not conditional on individual emissions, since they are not observable; rather it is conditional on aggregate emission. But the novelty here is that we do not assume the 10 regulator knows the agents' preferences, with which he could identify the target level of aggregate emission. Our mechanism dispenses with this information, yet it achieves Pareto optimality provided that the number of agents involved in the problem is known.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2012-17.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 12-17.

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Length: 12 pages
Date of creation: Jun 2012
Date of revision: Jun 2012
Handle: RePEc:lam:wpaper:12-17

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  1. Anastasios Xepapadeas, . "Observability And Choice Of Instrument Mix In The Control Of Externalities," Working Papers 9401, University of Crete, Department of Economics.
  2. Kim, Taesung, 1993. "A stable Nash mechanism implementing Lindahl allocations for quasi-linear environments," Journal of Mathematical Economics, Elsevier, vol. 22(4), pages 359-371.
  3. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  4. Joanne Roberts, 1999. "Implementing the Efficient Allocation of Pollution," Working Papers jorob-99-01, University of Toronto, Department of Economics.
  5. Yan Chen, 2002. "A family of supermodular Nash mechanisms implementing Lindahl allocations," Economic Theory, Springer, vol. 19(4), pages 773-790.
  6. Bezalel Peleg, 1996. "Double implementation of the Lindahl equilibrium by a continuous mechanism," Review of Economic Design, Springer, vol. 2(1), pages 311-324, December.
  7. Lars Hansen, 1998. "A Damage Based Tax Mechanism for Regulation of Non-Point Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(1), pages 99-112, July.
  8. Josef Falkinger & Ernst Fehr & Simon Gaechter, . "A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence," IEW - Working Papers 003, Institute for Empirical Research in Economics - University of Zurich.
  9. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  10. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
  11. Tian, Guoqiang, 1990. "Completely feasible and continuous implementation of the Lindahl correspondence with a message space of minimal dimension," Journal of Economic Theory, Elsevier, vol. 51(2), pages 443-452, August.
  12. Falkinger, Josef, 1996. "Efficient private provision of public goods by rewarding deviations from average," Journal of Public Economics, Elsevier, vol. 62(3), pages 413-422, November.
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