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Regulation by Prices and by Command

  • Glazer, Amihai
  • Lave, Charles

Standard economic theory states that regulation by price is more efficient than regulation by command and control. Exceptions may arise if regulators have good knowledge of the supply curve. In practice, though, governments usually regulate by command and control and do so when there is uncertainty about the technology of supply. We show that government may prefer to regulate by command and control when it cares about the investment decisions of a firm. Copyright 1996 by Kluwer Academic Publishers

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Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 9 (1996)
Issue (Month): 2 (March)
Pages: 191-97

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Handle: RePEc:kap:regeco:v:9:y:1996:i:2:p:191-97
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  1. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  2. Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
  3. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  4. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
  5. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  6. Chao, Hung-Po & Wilson, Robert, 1993. "Option Value of Emission Allowances," Journal of Regulatory Economics, Springer, vol. 5(3), pages 233-49, September.
  7. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December.
  8. Thomas A. Barthold, 1994. "Issues in the Design of Environmental Excise Taxes," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 133-151, Winter.
  9. Goodwin, Thomas H. & Patrick, Robert H., 1992. "Capital recovery for the regulated firm under certainty and regulatory uncertainty," Resources and Energy, Elsevier, vol. 14(4), pages 337-361, December.
  10. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
  11. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
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