Prices vs. Quantities with Increasing Marginal BenefitsJuly 18 | 12:00 PM - 1:30 PM (add to my calendar)
In these articles, the first unit of dose is the most damaging, the last unit of abatement (taking us to zero concentration) the most valuable. The dual benefit function must be strictly convex and so marginal benefits to abatement must be upward sloping. We compare quantity and price instruments in this setting, discovering that identifying the optimal price policy can be surprisingly difficult from a technical perspective. A quantity policy is never strictly preferred to a price policy. The level of uncertainty plays a central role that appears to have escaped notice until now, and the optimal emissions tax is sometimes discontinuous in the level of uncertainty.
Lunch will be provided.
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Washington, DC 20036