Regulation of Stock Externalities with Learning

Karp, Larry S.; Zhang, Jiangfeng

doi:10.2139/ssrn.223507

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Regulation of Stock Externalities with Learning

UC at Berkeley Dept. of Agricultural & Resource Economics Working Paper No. 892

45 Pages Posted: 5 Feb 2001

See all articles by Larry S. Karp

Jiangfeng Zhang

University of California, Berkeley

Date Written: January 19, 2001

Abstract

We study the situation where firms' actions contribute to a stock externality. The regulator and firms have asymmetric information about serially correlated (abatement) costs. With price-based policies such as taxes, the regulator learns about the evolution of both stock and costs. This ability to learn is important in determining the ranking of taxes and quotas, and in determining the value of a feedback rather than an open-loop policy.

Keywords: Pollution control, asymmetric information, learning, correlated costs, choice of instruments

JEL Classification: H21, Q28

Suggested Citation: Suggested Citation

Karp, Larry S. and Zhang, Jiangfeng, Regulation of Stock Externalities with Learning (January 19, 2001). UC at Berkeley Dept. of Agricultural & Resource Economics Working Paper No. 892, Available at SSRN: https://ssrn.com/abstract=223507 or http://dx.doi.org/10.2139/ssrn.223507