Citizens' demand for permits and Kwerel''s incentive compatible mechanism for pollution control
An interesting feature of pollution permit markets is that citizens may purchase permits to directly lower the levels of pollution. Kwerel's mechanism (Review of Economic Studies~1977) is not incentive compatible when citizens demand permits. We show that a modification of Kwerel''s mechainism, the minimum-price mechanism, is incentive compatible when citizens demand permits, even in the case where there is uncertainty about the damages from pollution.
Volume (Year): 17 (2007)
Issue (Month): 4 ()
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- Lewis, Tracy R. & Sappington, David E. M., 1995. "Using markets to allocate pollution permits and other scarce resource rights under limited information," Journal of Public Economics, Elsevier, vol. 57(3), pages 431-455, July.
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- Smith, Stefani C. & Yates, Andrew J., 2003. "Optimal pollution permit endowments in markets with endogenous emissions," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 425-445, November.
- Aparna Guha, 1996. "Internationalizing the Role of Domestic Pollution Permit Market," Eastern Economic Journal, Eastern Economic Association, vol. 22(4), pages 449-456, Fall.
- Evan Kwerel, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 595-601.
- Malueg, David A. & Yates, Andrew J., 2006. "Citizen participation in pollution permit markets," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 205-217, March.
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