IDEAS home Printed from https://ideas.repec.org/a/eee/jeeman/v73y2015icp1-12.html
   My bibliography  Save this article

The Weitzman price corner

Author

Listed:
  • Goodkind, Andrew L.
  • Coggins, Jay S.

Abstract

The standard theoretical approach to comparing price and quantity policies is strictly interior. We extend the comparison to account for the possibility of corner outcomes, where a polluting industry responds to a tax by abating either completely or not at all. We show that, when the uncertainty in marginal costs is high, the inclusion of corner outcomes confers an extra and unnoticed advantage upon an emissions tax. In situations where the standard approach would recommend a quantity policy, the possibility of corners can reverse that recommendation.

Suggested Citation

  • Goodkind, Andrew L. & Coggins, Jay S., 2015. "The Weitzman price corner," Journal of Environmental Economics and Management, Elsevier, vol. 73(C), pages 1-12.
  • Handle: RePEc:eee:jeeman:v:73:y:2015:i:c:p:1-12
    DOI: 10.1016/j.jeem.2015.06.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0095069615000479
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gary W. Yohe, 1978. "Towards a General Comparison of Price Controls and Quantity Controls under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 45(2), pages 229-238.
    2. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
    3. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
    4. Dallas Burtraw & Alan Krupnick & Erin Mansur & David Austin & Deirdre Farrell, 1998. "Costs And Benefits Of Reducing Air Pollutants Related To Acid Rain," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 379-400, October.
    5. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
    6. Larry Karp & Jiangfeng Zhang, 2012. "Taxes versus quantities for a stock pollutant with endogenous abatement costs and asymmetric information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 371-409, February.
    7. Martin L. Weitzman, 2014. "Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 29-49.
    8. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
    9. Yohe, Gary Wynn, 1977. "Comparisons of price and quantity controls: A survey," Journal of Comparative Economics, Elsevier, vol. 1(3), pages 213-233, September.
    10. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
    11. Moledina, Amyaz A. & Coggins, Jay S. & Polasky, Stephen & Costello, Christopher, 2003. "Dynamic environmental policy with strategic firms: prices versus quantities," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 356-376, March.
    12. Tarui, Nori & Polasky, Stephen, 2005. "Environmental regulation with technology adoption, learning and strategic behavior," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 447-467, November.
    13. Nicholas Z. Muller & Robert Mendelsohn, 2009. "Efficient Pollution Regulation: Getting the Prices Right," American Economic Review, American Economic Association, vol. 99(5), pages 1714-1739, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baran Doda & Simon Quemin & Luca Taschini, 2017. "A Theory of Gains from Trade in Multilaterally Linked ETSs," Working Papers 1706, Chaire Economie du climat.
    2. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    3. repec:spr:envpol:v:20:y:2018:i:1:d:10.1007_s10018-017-0187-4 is not listed on IDEAS
    4. Baran Doda & Simon Quemin, 2018. "Linking Permit Markets Multilaterally," Working Papers 1804, Chaire Economie du climat.
    5. repec:kap:pubcho:v:171:y:2017:i:1:d:10.1007_s11127-017-0401-8 is not listed on IDEAS

    More about this item

    Keywords

    Environmental policy; Prices versus quantities;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:73:y:2015:i:c:p:1-12. 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: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/622870 .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.