Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85850
Authors: 
Ossokina, Ioulia V.
Swank, Otto H.
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-011/1
Abstract: 
Market-based instruments are believed to create more efficient incentives for firmsto adopt new technologies than command-and-control policies. We compare the effects of a directtechnology regulation and of an adoption subsidy under asymmetric information about the costsof technological advances in pollution control. We show that the policy maker may want tocommit to her policy. The reason is that uncertainty about adoption costs induces the policymaker to set subsidy levels that increase over time; firms, expecting higher subsidies in thefuture, postpone investment. Direct regulation offers a commitment possibility that allows toprevent firms from postponing investment.
Subjects: 
Pollution abatement technologies
Market-based instruments
Command-and-control.
JEL: 
H23
O38
Document Type: 
Working Paper

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