Elsevier

Journal of Public Economics

Volume 28, Issue 2, November 1985, Pages 211-231
Journal of Public Economics

Regulation of prices and pollution under incomplete information

https://doi.org/10.1016/0047-2727(85)90070-2Get rights and content

Abstract

Regulation of prices and pollution for a monopolist with private information is considered with a focus on the relative efficiency of standard-setting and emissions taxation approaches to pollution control. With incomplete information, emissions taxation is a dominated regulatory instrument for abatement purposes because it generates information costs that can be avoided when an abatement standard and prices are set by the regulator. An emissions tax has value, however, as a means of reducing those information costs, but its use for this purpose may increase pollution.

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This research was supported by NSF Grant No. SES-8320119. The author would like to thank David Besanko, Joel Demski, Michael Harrison, Nancy Lutz, John Roberts, David Sappington, and two anonymous referees for their comments on an earlier version.

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