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Prices versus Quantities Reconsidered

  • Brozovic, Nicholas
  • Sunding, David L.
  • Zilberman, David

In comparing second-best prices and quantities, studies assume that quantities bind with probability one. We present a more general and realistic model of second-best regulation where quantity instruments can bind with probability less than one. This additional flexibility of quantity instruments makes them much more efficient than previously realized.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20257.

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Date of creation: 2004
Date of revision:
Handle: RePEc:ags:aaea04:20257
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  1. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
  2. Tietenberg, T. H., 1974. "Derived decision rules for pollution control in a general equilibrium space economy," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 3-16, May.
  3. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March.
  4. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
  5. Dasgupta, Partha & Hammond, Peter & Maskin, Eric, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 47(5), pages 857-60, October.
  6. Malcomson, James M, 1978. "Prices vs. Quantities: A Critical Note on the Use of Approximations," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 203-07, February.
  7. Besanko, David, 1987. "Performance versus design standards in the regulation of pollution," Journal of Public Economics, Elsevier, vol. 34(1), pages 19-44, October.
  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. Hochman, Eithan & Zilberman, David, 1978. "Examination of Environmental Policies Using Production and Pollution Microparameter Distributions," Econometrica, Econometric Society, vol. 46(4), pages 739-60, July.
  10. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers 106, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Charles D. Kolstad, 1986. "Empirical Properties of Economic Incentives and Command-and-Control Regulations for Air Pollution Control," Land Economics, University of Wisconsin Press, vol. 62(3), pages 250-268.
  12. Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-34, June.
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