On the Limitation of Penalties and the Non-Equivalence of Penalties and Taxes
This paper compares the impacts of a penalty on accident and a per-unit tax on output, when social damages depend on the output of firms. The choice of the optimal regulation, aiming at internalizing a damage, is influenced both by the market power of firms and by their potential (in)solvency in case of accident. Output strategies influence the solvency situation of firms for paying a penalty, which may lead to multiple equilibria (all firms are either solvent or insolvent in case of accident). When social damages are large, the optimal penalty is capped for avoiding a situation with insolvent firms. In this case, a regulator implements a per-unit tax.
|Date of creation:||01 Sep 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 01 30 81 53 30
Fax: 01 30 81 53 68
Web page: http://www4.versailles-grignon.inra.fr/economie_publique_eng
More information through EDIRC
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.:
- Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
- Lewis, Tracy R. & Sappington, David E. M., 1999. "Using decoupling and deep pockets to mitigate judgment-proof problems1," International Review of Law and Economics, Elsevier, vol. 19(2), pages 275-293, June.
- Boyd, James & Ingberman, Daniel E, 1994. "Noncompensatory Damages and Potential Insolvency," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 895-910, June.
- A. Mitchell Polinsky & William P. Rogerson, 1983.
"Products Liability, Consumer Misperceptions, and Market Power,"
Bell Journal of Economics,
The RAND Corporation, vol. 14(2), pages 581-589, Autumn.
- A. Mitchell Polinsky & William P. Rogerson, 1982. "Products Liability, Consumer Misperceptions, and Market Power," NBER Working Papers 0937, National Bureau of Economic Research, Inc.
- Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
- Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
- Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
- Stephen F. Hamilton, 1998.
"Taxation, Fines, and Producer Liability Rules: Efficiency and Market Structure Implications,"
Southern Economic Journal,
Southern Economic Association, vol. 65(1), pages 140-150, July.
- Hamilton, Stephen F., 1998. "Taxation, Fines, And Producer Liability Rules: Efficiency And Market Structure Implications," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20928, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Polinsky, A Mitchell, 1980. "Strict Liability vs. Negligence in a Market Setting," American Economic Review, American Economic Association, vol. 70(2), pages 363-67, May.
When requesting a correction, please mention this item's handle: RePEc:apu:wpaper:2004/02. 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: (RÃ©gis Grateau)
If references are entirely missing, you can add them using this form.