Prices vs. Quantities in Monopolistic Competition

In perfectly competitive markets taxes and quotas are fully equivalent measures for environmental protection. Based on this regulators' revealed preferences for quotas over that of fees finds its explanation in the procedures and spirits of political decision making. This paper offers another explanation: Ordinary welfare economic considerations make a quota preferable to a tax when regulating polluting firms in monopolistically competitive markets.


Issue Date:
2000
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/24203
Total Pages:
23
JEL Codes:
D61; D62; D43
Series Statement:
Unit of Economics Working Paper 2000/3




 Record created 2017-04-01, last modified 2017-04-04

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