Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/191408 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7383
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We develop a dynamic regulation game for a stock externality under asymmetric information and future market uncertainty. Within this framework, regulation is characterized as the implementation of a welfare-maximization program conditional on informational constraints. We identify the most general executable programs and find these yield simple and intuitive time-consistent policy rules that implement the stochastic first best as long as a future market exists. We apply our theory to carbon dioxide emissions trading schemes and find substantial welfare gains are possible, compared to current practices.
Subjects: 
asymmetric information
regulatory instruments
policy updating
emission trading
pollution
climate change
JEL: 
H23
Q54
Q58
Document Type: 
Working Paper
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