Stochastic pollution, permits, and merger incentives
- Iowa State Univ., Ames, IA (United States). Dept. of Economics
Pollution permit regulations introduce nonlinearities into the objective function of a polluting firm. The authors develop a microeconomic model to show the effects these nonlinearities might have upon firm decisions when emissions are stochastic. Under perfect competition the fraction of planned pollution covered by permits is shown to be separable from planned production. The authors also demonstrate that permit management incentives may motivate a merger of otherwise independent firms. Incentives to petition for bubble coverage are also considered. The model is studied under risk neutrality and risk aversion. Imperfectly competitive situations in the output and permit markets are also analyzed.
- OSTI ID:
- 355510
- Journal Information:
- Journal of Environmental Economics and Management, Journal Name: Journal of Environmental Economics and Management Journal Issue: 3 Vol. 37; ISSN JEEMDI; ISSN 0095-0696
- Country of Publication:
- United States
- Language:
- English
Similar Records
Controlling stochastic pollution events through liability rules: some evidence from OCS leasing
Pollution prevention incentives and responses in Chinese firms