Prices vs. quantities in a dynamic problem: Externalities from resource extraction
This paper shows how a stationary tax policy can optimally address a flow externality associated with resource extraction when the policymaker faces asymmetric information. In the model I consider, the policymaker must set policy in each period before the realization of a price shock. Resource owners then learn the value of the shock, and the owners choose extraction quantities. The optimal policy is a stationary tax rule that responds to a positive shock to the current price by reducing next period's tax rate. Intuitively, a reduction in next period's tax rate makes extraction next period less expensive and thus dampens the resource owner's current response to a price increase. This policy is robust to some, but not necessarily all, boundary solutions.
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.
Volume (Year): 33 (2011)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/505569|
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.:
- Coria, Jessica, 2008.
"Taxes, Permits, and the Diffusions of a New Technology,"
dp-08-26-efd, Resources For the Future.
- Coria, Jessica, 2009. "Taxes, permits, and the diffusion of a new technology," Resource and Energy Economics, Elsevier, vol. 31(4), pages 249-271, November.
- Newell, Richard G. & Pizer, William A., 2003.
"Regulating stock externalities under uncertainty,"
Journal of Environmental Economics and Management,
Elsevier, vol. 45(2, Supple), pages 416-432, March.
- Lars E. O. Svensson, 2003.
"What is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules,"
NBER Working Papers
9421, National Bureau of Economic Research, Inc.
- Lars E. O. Svensson, 2003. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 426-477, June.
- Hoel, Michael & Karp, Larry, 2001.
"Taxes versus Quotas for a Stock Pollutant,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
- Pizer, William & Newell, Richard & Zhang, Jiangfeng, 2003.
"Managing Permit Markets to Stabilize Prices,"
dp-03-34, Resources For the Future.
- Martin L. Weitzman, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Oxford University Press, vol. 41(4), pages 477-491.
- Farzin, Y. H., 1996. "Optimal pricing of environmental and natural resource use with stock externalities," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 31-57, October.
- Long, Ngo Van & Sinn, Hans-Werner, 1985. "Surprise Price Shifts, Tax Changes and the Supply Behaviour of Resource Extracting Firms," Australian Economic Papers, Wiley Blackwell, vol. 24(45), pages 278-89, December.
- Weitzman, Martin L., 2002. "Landing Fees vs Harvest Quotas with Uncertain Fish Stocks," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 325-338, March.
When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:33:y:2011:i:4:p:843-854. 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: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.