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Nonlinear Effluent Charges

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  • Terry A. Ferrar

    (University of California, Riverside)

Abstract

This work derives an effluent taxation structure for meeting a specified level of regional environmental quality. It is demonstrated that the nonlinearity of the proposed charge scheme flaunts equilibrium results identical to linear user-charge programs but elicits superior dynamic characteristics. Moreover, through the use of an iterative stimulus-response algorithm we are able to minimize the technical information transfer among sectors by mapping response surfaces for polluter behavior. These continuously updated response patterns are then used to guide the system to a social optimum. Recognizing that the optimal allocation of environmental resources is likely to be a vacillating target, and that the existence of adjustment lags must be reckoned with in any operational context, we argue that meaningful policing of environmental quality will require the nonlinear taxation approach.

Suggested Citation

  • Terry A. Ferrar, 1973. "Nonlinear Effluent Charges," Management Science, INFORMS, vol. 20(2), pages 169-178, October.
    • Handle: RePEc:inm:ormnsc:v:20:y:1973:i:2:p:169-178
    DOI: 10.1287/mnsc.20.2.169
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