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Prices vs. quantities : the effects on technology choice

Krysiak, Frank C.. (2008) Prices vs. quantities : the effects on technology choice. Journal of public economics, Vol. 92. S. 1275-1287.

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Official URL: http://edoc.unibas.ch/dok/A5248832

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Abstract

It is well-known that price- and quantity-based regulation approaches provide different investment incentives. But usually, only the effect on the level of investment is studied. In this paper, we show that under uncertainty, they also lead to the adoption of different technologies due to the disparate risks that a regulated firm is exposed to. Different regulatory instruments induce different technologies and this effect cannot be compensated by varying the design of the instruments. Furthermore, price-based instruments lead to the adoption of a socially suboptimal technology, so that the inclusion of technology choice provides a bias in favor of a quantity-based regulation compared with Weitzman`s (Weitzman, M.L., 1974. Prices vs. quantities. Review of Economic Studies 41; 477-491) criterion. (C) 2007 Elsevier B.V. All rights reserved.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Umweltökonomie (Krysiak)
UniBasel Contributors:Krysiak, Frank Christian
Item Type:Article, refereed
Bibsysno:Link to catalogue
Publisher:North Holland Publ.
ISSN:0047-2727
Note:Publication type according to Uni Basel Research Database: Journal article
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Last Modified:22 Mar 2012 14:28
Deposited On:22 Mar 2012 14:03

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