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Prices versus Quantities: The Political Perspective

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  • Finkelshtain, Israel
  • Kislev, Yoav

Abstract

Regulation regimes subject to the influence of interest groups are compared. It is shown that the allocation of the regulated commodity varies with the implemented control and that the advantage of prices (versus quotas) increases with the elasticity of the demand for or the supply of the commodity and decreases with the number of organized producers in the regulated industry. Control regimes can be ranked for negative, but not positive, externalities. Finally, a control regime leading to a more efficient commodity allocation also entails using fewer resources in rent-seeking activities. Copyright 1997 by the University of Chicago.

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  • Finkelshtain, Israel & Kislev, Yoav, 1997. "Prices versus Quantities: The Political Perspective," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 83-100, February.
    • Handle: RePEc:ucp:jpolec:v:105:y:1997:i:1:p:83-100
    DOI: 10.1086/262066
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    Cited by:

    1. Yu-Bong Lai, 2003. "Interest Groups, Economic Competition, and Endogenous Public Policy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(2), pages 342-361, June.
    2. Eli Feinerman & Israel Finkelshtain & Iddo Kan, 2004. "On A Political Solution to the NIMBY Conflict," American Economic Review, American Economic Association, vol. 94(1), pages 369-381, March.
    3. Akira Maeda, 2012. "Setting trigger price in emissions permit markets equipped with a safety valve mechanism," Journal of Regulatory Economics, Springer, vol. 41(3), pages 358-379, June.
    4. Qinglong Wang & Jiale Huang & Xian Zhang & Weina Qin & Huina Zhang & Yani Dong, 2022. "Climate Change and Human Response to Sustainable Environmental Governance Policy: Tax or Emissions Trading?," Sustainability, MDPI, vol. 14(15), pages 1-13, August.
    5. Yerushalmi, Erez, 2018. "Using Water Allocation in Israel as a Proxy for Imputing the Value of Agricultural Amenities," Ecological Economics, Elsevier, vol. 149(C), pages 12-20.
    6. Villegas, Clara & Coria, Jessica, 2009. "Taxes, Permits, and the Adoptation of Abatement Technology under Imperfect Compliance," RFF Working Paper Series dp-09-20-efd, Resources for the Future.
    7. A. Reznik & E. Feinerman & I. Finkelshtain & I. Kan & F. Fisher & A. Huber-Lee & B. Joyce, 2016. "The Cost of Covering Costs: A Nationwide Model for Water Pricing," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(04), pages 1-39, December.
    8. Pauli Lappi, 2021. "Lobbying for size and slice of the quota," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1143-1162, October.
    9. Clara Villegas-Palacio & Jessica Coria, 2010. "On the interaction between imperfect compliance and technology adoption: taxes versus tradable emissions permits," Journal of Regulatory Economics, Springer, vol. 38(3), pages 274-291, December.
    10. Ian A. MacKenzie, 2015. "Prices versus quantities with distributional rent seeking," Discussion Papers Series 548, School of Economics, University of Queensland, Australia.
    11. By Thomas Eichner & Rüdiger Pethig, 2015. "Self-enforcing international environmental agreements and trade: taxes versus caps," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 897-917.
    12. Montero, Juan-Pablo, 2002. "Prices versus quantities with incomplete enforcement," Journal of Public Economics, Elsevier, vol. 85(3), pages 435-454, September.
    13. Finkelshtain, Israel & Kislev, Yoav, 1996. "Economic Regulation and Political Influence," Working Papers 232692, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    14. Linda Cohen & Amihai Glazer, 2008. "Regulation with Budget Constraints Can Dominate Regulation by Price and by Quantity," Working Papers 080903, University of California-Irvine, Department of Economics.
    15. Tapio Palokangas, 2019. "Emission permit trading with a self-interested regulator," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(3), pages 413-426, July.
    16. Doron Nisani, 2018. "Efficient indirect regulation under Protection for Sale," Journal of Regulatory Economics, Springer, vol. 54(1), pages 41-52, August.
    17. Fageda, Xavier & Flores-Fillol, Ricardo & Theilen, Bernd, 2022. "Price versus quantity measures to deal with pollution and congestion in urban areas: A political economy approach," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    18. Michael Reksulak & William Shughart, 2012. "What should government do? Problems of social cost, externalities and all that," Public Choice, Springer, vol. 152(1), pages 103-114, July.
    19. Bar-Nahum, Ziv & Reznik, Ami & Finkelshtain, Israel & Kan, Iddo, 2022. "Centralized water management under lobbying: Economic analysis of desalination in Israel," Ecological Economics, Elsevier, vol. 193(C).
    20. Pauli Lappi, 2017. "Too many traders? On the welfare ranking of prices and quantities," Economics Bulletin, AccessEcon, vol. 37(3), pages 1959-1965.
    21. Ian A. MacKenzie, 2017. "Rent creation and rent seeking in environmental policy," Public Choice, Springer, vol. 171(1), pages 145-166, April.

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