Learning abatement costs: On the dynamics of the optimal regulation of experience goods
We study the introduction of new technologies when their costs are subject to idiosyncratic uncertainty and can only be fully learned through individual experience. We set up a dynamic model of clean experience goods that replace old polluting consumption options and show how optimal regulation evolves over time. In our base setting where social and private learning incentives coincide, the optimal tax on the polluting consumption is increasing over time. We show, however, that if social and private learning incentives diverge because the private discount rate exceeds the social discount rate, it may be optimal to temporarily increase the tax rate beyond net marginal external damages to induce more learning before reducing the tax rate to the steady state level. Alternatively, one could complement the tax with subsidies for first-time users which can be phased out over time. Similar results apply if consumers have biased expectations. We therefore give a rationale for introductory subsidies on new, clean technologies and non-monotonic tax paths from a perspective of consumer learning.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul R. Milgrom & John Roberts, 1984.
"Price and Advertising Signals of Product Quality,"
Cowles Foundation Discussion Papers
709, Cowles Foundation for Research in Economics, Yale University.
- Jacques Cremer, 1984. "On the Economics of Repeat Buying," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 396-403, Autumn.
- Bénabou, Roland & Tirole, Jean, 2004.
"Incentives and Prosocial Behaviour,"
CEPR Discussion Papers
4633, C.E.P.R. Discussion Papers.
- Roland Bénabou & Jean Tirole, 2006. "Incentives and Prosocial Behavior," Post-Print hal-00173700, HAL.
- Bénabou, Roland & Tirole, Jean, 2003. "Incentives and Prosocial Behavior," IDEI Working Papers 389, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jan 2006.
- Roland Bénabou & Jean Tirole, 2004. "Incentives and Prosocial Behavior," Working Papers 137, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- Benabou, Roland & Tirole, Jean, 2005. "Incentives and Prosocial Behavior," IZA Discussion Papers 1695, Institute for the Study of Labor (IZA).
- Roland Bénabou & Jean Tirole, 2005. "Incentives and Prosocial Behavior," NBER Working Papers 11535, National Bureau of Economic Research, Inc.
- Alois Stutzer & Lorenz Goette & Michael Zehnder, 2006.
"Active decisions and pro-social behavior: A field experiment on blood donation,"
Natural Field Experiments
00335, The Field Experiments Website.
- Alois Stutzer & Lorenz Goette & Michael Zehnder, 2011. "Active Decisions and Prosocial Behaviour: a Field Experiment on Blood Donation," Economic Journal, Royal Economic Society, vol. 121(556), pages F476-F493, November.
- Stutzer, Alois & Götte, Lorenz & Zehnder, Michael, 2006. "Active Decisions and Pro-social Behavior: A Field Experiment on Blood Donation," IZA Discussion Papers 2064, Institute for the Study of Labor (IZA).
- Alois Stutzer & Lorenz Goette & Michael Zehnder, 2006. "Active Decisions and Pro-social Behavior: A Field Experiment on Blood Donation," IEW - Working Papers 279, Institute for Empirical Research in Economics - University of Zurich.
- Lorenz Goette & Alois Stutzer & Michael Zehnder, 2006. "Active Decisions and Pro-social Behavior: A Field Experiment on Blood Donation," Working papers 2006/07, Faculty of Business and Economics - University of Basel.
- Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, 07.
- Daniel A. Ackerberg, 2003. "Advertising, learning, and consumer choice in experience good markets: an empirical examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1007-1040, 08.
- Weitzman, M.L., 1993.
"On the 'Environmental' Discount Rate,"
Harvard Institute of Economic Research Working Papers
1625, Harvard - Institute of Economic Research.
- Mark Israel, 2005. "Services as Experience Goods: An Empirical Examination of Consumer Learning in Automobile Insurance," American Economic Review, American Economic Association, vol. 95(5), pages 1444-1463, December.
- Erdem, Tulin & Imai, Susumu & Keane, Michael, 2003.
"Brand and Quantity Choice Dynamics Under Price Uncertainty,"
52516, University Library of Munich, Germany.
- Tülin Erdem & Susumu Imai & Michael Keane, 2003. "Brand and Quantity Choice Dynamics Under Price Uncertainty," Quantitative Marketing and Economics, Springer, vol. 1(1), pages 5-64, March.
- Carl Shapiro, 1983. "Optimal Pricing of Experience Goods," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 497-507, Autumn.
- Joseph Farrell, 1986.
"Moral Hazard as an Entry Barrier,"
RAND Journal of Economics,
The RAND Corporation, vol. 17(3), pages 440-449, Autumn.
- Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
- Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
- Dirk Bergemann & Juuso VÃ¤limÃ¤ki, 2006. "Dynamic Pricing of New Experience Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 713-743, August.
When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:66:y:2013:i:3:p:625-638. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.