Adverse Selection, Emission Permits and Optimal Price Differentiation
In this paper, we focus on the adverse selection issue that prevails in an economy when the regulator is not able to observe the type of the abate- ment costs of the firms. The regulator decides the total level of emission that minimizes the total social cost and he sells them to the firms at some di¤erentiated prices. When firms can hide their type relative to their true abatement costs, prices must not only minimize the social cost of the envir- onmental policy. They must also induce the firms to reveal their true type. A striking point of our model is that there is no participation constraint for firms are compelled to be actors of the environmental policy. Another original result concerns the rent, which still benefits to low-cost types, but which appears to be a fee paid by high-cost types.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: PEGE. 61, Aven. de la Forêt-Noire 67000 Strasbourg|
Phone: +33 3 68 85 20 69
Fax: +33 3 68 85 20 70
Web page: http://www.beta-umr7522.fr/
More information through EDIRC
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.:
- Baumol,William J. & Oates,Wallace E., 1988.
"The Theory of Environmental Policy,"
Cambridge University Press, number 9780521322249, November.
- Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
- Stewart, Jay, 1994. "The Welfare Implications of Moral Hazard and Adverse Selection in Competitive Insurance Markets," Economic Inquiry, Western Economic Association International, vol. 32(2), pages 193-208, April.
- Laffont, Jean-Jacques & Tirole, Jean., 1988.
"Adverse Selection and Renegotiation in Procurement,"
665, California Institute of Technology, Division of the Humanities and Social Sciences.
- Jean-Jacques Laffont & Jean Tirole, 1990. "Adverse Selection and Renegotiation in Procurement," Review of Economic Studies, Oxford University Press, vol. 57(4), pages 597-625.
- Jean-Jacques LAFFONT & Jean TIROLE, 1990. "Adverse Selection and Renegotiation in Procurement," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9005, Université de Lausanne, Faculté des HEC, DEEP.
- Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
- Michel Mougeot & Sonia Schwartz, 2008.
"Allocation optimale de quotas de pollution et information asymétrique,"
- Michel Mougeot & Sonia Schwartz, 2008. "Allocation optimale de quotas de pollution et information asymétrique," Revue économique, Presses de Sciences-Po, vol. 59(3), pages 505-515.
- Shah, Sudhir A., 2005. "Optimal management of durable pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 29(6), pages 1121-1164, June.
- Martin L. Weitzman, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Oxford University Press, vol. 41(4), pages 477-491.
- 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.
- Bulckaen, Fabrizio, 1997. "Emissions Charge and Asymmetric Information: Consistently a Problem?," Journal of Environmental Economics and Management, Elsevier, vol. 34(1), pages 100-106, September.
When requesting a correction, please mention this item's handle: RePEc:ulp:sbbeta:2010-07. 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: ()
If references are entirely missing, you can add them using this form.