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Title:Prices vs quantities: The case of risk averse agents PDF Logo
Authors:Baldursson, Fridrik M.
Fehr, Nils-Henrik M. von der
Issue Date:2002
Series/Report no.:Memorandum, Department of Economics, University of Oslo 2002,01
Abstract:We explore the efficacy of price and quantity controls as environmental policy instruments in a stochastic setting in which agents are risk averse. We demonstrate that the assumption of risk aversion may improve the performance of a tax relative to that of a system of tradable quotas, and that restricting quota trade may enhance efficiency even though risk aversion in itself limits volumes of trade. The government may be able to improve the performance of a tradable quota system by judicious choice of distribution and amount of initial quotas and by trading pro-actively in the quota market.
Subjects:regulation
effluent taxes
tradable quotas
uncertainty
risk aversion
environmental management
JEL:D81
H23
L51
Q28
Q38
Document Type:Working Paper
Appears in Collections:Memorandum, Department of Economics, University of Oslo

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